RTE will lose a record £13.5 million this year and could make even bigger losses next year if it does not cut costs, Mr Paddy Wright, the state broadcaster's new chairman, has warned.

"We are facing mega losses next year," said Mr Wright, the former group president and chief operating officer of Smurfit Group, who took up his post at the start of the month.

RTE last reported a surplus in 1998, when it made a £5.94 million (€7.55 million) profit. It will shortly publish its results for 1999.

They are expected to show a loss of £7 million (€8.9 million).

Mr Wright said that the company has had to set aside £40 million of the £130 million proceeds from the sale of its 25 per cent stake in Cablelink for a restructuring package aimed at cutting recurring costs by £15 million over three years.

There has been a resistance on the part of the station's employees to acknowledging the extent of the financial crisis facing the organisation, he said.

"Getting the unions and the staff to agree that there is a problem has been difficult," he added.

He said that in recent weeks the unions representing RTE's staff of 2,200 had finally agreed to begin formal negotiations on a transformation agreement. Management is seeking agreement on cutting up to 400 jobs through a mixture of voluntary redundancies and early retirement.

The unions are being advised by PricewaterhouseCoopers, which had told them that the cost-cutting proposals were fair and in some ways conservative, said Mr Wright.

Payroll costs account for over 50 per cent of the station's annual running costs of almost £200 million.

RTE will also be seeking an unspecified increase in the television licence fee in the autumn, said Mr Wright.

The station first has to be able to show the Government that it had its costs under control and that any extra revenue from the licence fee will go into improved programming. "Our costs are out of control. But we have started a programme to reduce them," he said. RTE's advertising revenue is static while its share of the overall market is decreasing, he said. It now has only 44 per cent of the television viewing market and 47 per cent of radio listenership.

In 1998, the most recent figures available, advertising from television generated £78 million, while radio generated £17.4 million.

Television licence fee income brought in £63.3 million. Payroll costs have increased, as has the price of bought-in programming, said Mr Wright.

RTE bids and pays for foreign television programmes in dollars and has been adversely affected by the decline of the euro against the US currency, he said.

Mr Wright said that the company must also increase revenues from its commercial enterprises department, which includes the RTE Guide.