THE AER Lingus board has given the go-ahead for a radical programme of cost-cutting that could see close to 500 staff leaving the company.
The board of the airline met for five hours yesterday to approve the plan, which is aimed at reducing costs by €130 million and helping the business return to profitability.
The proposals finalised yesterday are expected to be unveiled around the middle of next week by Aer Lingus’s new chief executive Christoph Mueller.
The restructuring is expected to see Aer Lingus seek several hundred redundancies from its workforce of almost 3,900 and to ask remaining staff to take a significant pay cut.
The salary reduction, likely to be about 10 per cent, will also apply to the airline’s directors. Aer Lingus is likely to seek an end to so-called “legacy” work practices as part of the overall programme.
Unions at the airline are not expected to accept the proposals without substantial objection or industrial action. This is likely to be uppermost in the mind of directors, who will be aware of a knock-on effects a strike could have on passenger confidence and cashflow.
At an operational level, the company is also believed to have settled on changes to its transatlantic schedule in a bid to strip costs from the most loss-making aspects of its business.
In August, Aer Lingus reported an operating loss of €93 million for the first six months of 2009. This record half-year loss for the company equated to it losing €511,000 a day. It is thought about €60 million of the six-month loss related to transatlantic flights, even though this business only brings in 8 per cent of the company’s passengers.
Premium-class trade on flights to the US fell by one-third in the first half, with just 30 per cent of seats in this category being filled at some stages.
At the time of the results being issued, the airline said its Shannon- New York service “remains under review”. The Government is thought to view the route as important, however, possibly leading Aer Lingus to suggest a compromise that would see some Dublin-New York flights stopping at Shannon.
Aer Lingus chairman Colm Barrington said the airline must prepare for a future where fares would continue to decline and fuel costs and competition would increase. He said compulsory redundancies could not be ruled out if agreement with unions could not be reached.
“We have to change Aer Lingus, it cannot go on the way it is,” he said at the time. “We have to do whatever has to be done.”
Mr Barrington also indicated at that stage that any severance package offered by the airline would not be as generous as those seen at the airline in previous times. No comment was available from Aer Lingus last night.