Aer Lingus situation 'grave', says O'Rourke

The Minister for Public Enterprise told the Dáil today securing a future for Aer Lingus would not be easy, as the company was facing losses of £170 million by the end of next year.

Mrs O’Rourke said a "very grave financial situation" was now facing the company. This could be "severe and long lasting and could change the structure of the industry", she said.

She confirmed bookings on trans-Atlantic routes were down by 80 per cent on last year and that UK and European business had fallen by 30 per cent since the September 11th terrorist attacks in the US.

The airline was now in serious trouble, with cash reserves expected to run out as early as next January. The Minister said public rumours the company had huge cash deposits were untrue, as the only assets available amounted to £185 million.

Aer Lingus was estimating it would lose £70 million this year and up to £100 million in 2002, she said.

Mrs O’Rourke said industrial relations disputes, the impact of foot-and-mouth and the deepening global economic downturn also contributed to the company announcing in June that they were heading for a loss in 2001.

Officials from the Department of Public Enterprise have been holding crisis talks with Aer Lingus management over the past few weeks. Mrs O’Rourke said she was expecting a final proposal from the board on solutions to the crisis within the next few days.

Securing the future of the airline will "require a major change in the structure and focus of the airline and significant changes for management and staff," she said, adding this may amount to a 25 per cent cutback in scale of operations.

The leader of Fine Gael, Mr Michael Noonan, suggested Aer Lingus might have more chance of survival if it were to divide into two separate companies. He said one branch of the company could remain financially secure by just serving Europe.

The Government could then apply to the EU to be allowed grant State aid to the second branch, which would operate on the loss-making transatlantic routes.