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A bad week at Aer Lingus

IT'S been a bad week for Christoph Mueller, easily his worst since he became Aer Lingus boss in September 2009.

While the news that Aer Lingus was having to set aside €32.5m to cover the tax bill incurred by "redundancy" payments, after the restructuring of its ground operations in November 2008 was bad enough, potentially far more serious is the rise in oil prices, which briefly touched $120 a barrel.

After the Revenue Commissioners demanded the unpaid tax, PRSI, interest and penalties on the "redundancy" payments, Aer Lingus made a €32.5m provision which will almost wipe out the airline's 2010 operating (pre-interest) profits.

Most analysts had expected this would have come in at around €42m.

However, the "redundancy" debacle is a one-off which occurred before Mueller arrived.

It is the soaring price of oil that will have investors most worried.

With an annual fuel bill of €331m in 2009 and with just one-third of its 2011 fuel needs hedged, higher oil prices have the potential to devastate the Aer Lingus bottom line. No wonder the airline's share price fell by 6 per cent this week to just under 95 cent.

If Mueller thought he had a tough job on his hands then things have just become a lot tougher.

Sunday Indo Business