Aer Lingus to cut fares
Published 03/10/2008 | 11:12
Aer Lingus is set to reduce its fares even further to compete with budget carriers as it predicts losses of at least €65m next year.
Details of a presentation to unions, seen by the Irish Independent, reveal the airline is planning to offer better deals on flights "to drive customer volumes".
The airline told SIPTU and Impact that difficult market conditions would continue despite a reduction in the cost of fuel from over $120 ($87) a barrel to $100 ($72) in recent weeks, as the "majority of key markets are in recession".
Management predicted at meetings with its main unions that losses would be €65m next year if the price of fuel stayed at its current level. This would be far less than the €100m anticipated when results for the first half of the year were announced.
However, executives said if the "revenue outlook" deteriorated, losses "would be larger".
Further extracts from its '2009 Market Outlook' also reveal it expects operating losses of around €23m this year "at best".
Projections of the airline's future costs will be top of its board's agenda when it meets today to make another attempt to reach agreement on major cost-cutting proposals.
The airline has been mulling over a variety of plans to make savings since it announced a root and branch review of operations after revealing losses of €22m for the first half of the year.
Among the proposals being considered is the outsourcing of 1,300 ground-handling staff at Dublin, Cork and Shannon airports -- a move that is bitterly opposed by the unions.
Insiders have confirmed that management has been in talks with suppliers, including Servisair, and there was also speculation that the airline might be tempted to hire US cabin crew on transatlantic flights to make extra savings.
Impact outlined its opposition to the alleged proposals at a meeting at Dublin Airport yesterday, a day after SIPTU also warned the company that outsourcing was "not an option" at a similar meeting attended by CEO Dermot Mannion.
Company sources said it was "unlikely" that there would be a major announcement today on the details of the cost-cutting programme following the board meeting, as management was due to meet with the unions to update them on the board's discussions early next week.
Last night, SIPTU said the company's projections in the event of lower fuel costs "gave hope" that Aer Lingus would not go too far down the "no-frills" route associated with Ryanair.
Unions fear the recent appointment of former Ryanair director of scheduled revenue, Sean Coyle, as Aer Lingus' chief financial officer and board member, could cause it to mimic the budget airline's employment practices. SIPTU said they include hiring large numbers of agency staff on less favourable terms and conditions.
"Things might not be so bad if the price of fuel stays where it is, and what would happen if it went down to $50 a barrel?" said a spokesperson. "The biggest problem every airline has is fuel prices. It can add €4m or €5m to costs if the value of the price of oil goes up by even a dollar.
"The way the review goes will depend on the board. It didn't go to plan two weeks ago when management was confident they would get their proposals through and had even organised a press conference and presentations to staff in Cork.
"As far as we are concerned, direct employment is the only way to go. You can only take so much off the cost of staff before the standard of service is in danger."
A spokesperson for Aer Lingus said that meetings with the unions were "productive".
Aer Lingus management will meet SIPTU, which represents over 1,700 ground handling staff, on Monday morning; and Impact, which represents 1,300 cabin crew and just under 500 pilots, during the afternoon to update the unions on the cost-cutting programme following today's scheduled board meeting.