Aer Lingus's restructuring plan makes no provision for redundancy payments for the 2,500 staff who will lose their jobs. Sources familiar with the plan said yesterday that, contrary to some reports, the airline had not even allowed for statutory redundancy payments.
The plan also proposes changes to work practice that will require a 25 per cent increase in productivity from the remaining 3,800 staff. This will allow operations to be scaled back by 25 per cent, while staff are cut by 40 per cent.
The decision not to include any figure for redundancy payments implicitly acknowledges that the issue will be a subject of negotiation with the airline's unions and that the Government will have a role in the process.
The company expects to record a small trading loss next year, despite the restructuring, which has targeted overall savings of £130 million per year, of which £90 million would come from payroll cuts. If the savings were not implemented, the airline's losses could exceed £130 million.
However, the Minister for Public Enterprise, Ms O'Rourke, acknowledged last night that EU transport ministers meeting in Luxembourg today were unlikely to back a Government loan guarantee for Aer Lingus that would smooth the airline's restructuring.
Aer Lingus management has assumed there will be no improvement in trading conditions until the second half of next year, and that the company's cash flow will be negative for the first two quarters of 2002. This will result in a working capital deficit of up to £40 million, according to sources.
Fresh capital, either in the form of equity or loans from the Government, will be needed to make up the deficit and fund any redundancy programme. A generous redundancy programme of more than £50,000 per leaving worker would cost more than £125 million. The Government may have to guarantee loans of up to £200 million in order to facilitate the rescue, according to some sources.
The plan, which was completed at 4 a.m. yesterday and delivered to Ms O'Rourke at 7.30 a.m., specifies no figure for the amount of cash that will have to be injected into the business.
The restructuring process is now expected to move forward on a number of fronts. Aer Lingus management are not expected to start detailed negotiations with the SIPTU and IMPACT unions until the end of the week. The unions and their advisers have been briefed on the situation at the airline, but have not been formally briefed with the plan, which has yet to be endorsed by the Department of Public Enterprise.
The multi-strand negotiations cannot begin in earnest until there is more clarity about the European Commission's position on State aid to airlines. The Commission is expected to outline its views today at a meeting of transport ministers in Luxembourg. Ms O'Rourke said today's meeting was unlikely to back a Government loan guarantee. However, she restated the Government's intention to ensure the airline survives.