Monday 14 October 2019

Aer Lingus in survival fight

AER LINGUS management have left no doubt that they mean business and that they intend to do the business quickly. The cutbacks announced by the airline yesterday were probably more severe than the unions had expected. "Severe and draconian", was the immediate diagnosis.

Clearly, there will be many intense conversations between union and management in the seven-week countdown to November 30, management's deadline for an end to negotiations. There is no appetite for a repeat of last year's protracted talks which went on for 18 months.

In truth, such a delay could inflict serious damage on the company. Moreover, in the present climate, the alternative to severe cost cutting could be complete annihilation.

For Aer Lingus is only one of many airlines throughout the world whose very future is at risk due to high fuel prices, economic doldrums and a dramatic drop in customer confidence. Airline share prices have dropped by an average of 40pc internationally.

At home, Aer Lingus's problems are exacerbated by recession and head-to-head competition with Europe's lowest cost airline.

Fuel accounts for about 35pc of Aer Lingus's costs and has doubled in price in the past year, mocking the company's best hedging planning. Losses of €22m for the first six months of 2008 prompted chief executive Dermot Mannion to speak of "difficult and fundamental changes" in the year ahead. Yesterday, having outlined those changes, he warned against a rush to judgment and spoke of plenty of time "over the next couple of days" to tease out the details of the plan.

No need to hurry then.

The workers, who are to be offered terms in line with those in the 2004 package, will point to Aer Lingus's considerable cash reserves, gleaned from a successful Initial Public Offering (IPO) in 2006. The proceeds of that IPO raised net cash balances to above €802m, a formidable war chest.

However, even if oil prices do not rise above present levels, the company's fuel costs will be €70m higher next year, and higher again, the following year, raising the prospect of more losses.

Once again, Aer Lingus and its workers are about to go head-to-head.

The unions will fight for the best possible deal. The company is fighting for its life.

Unity needed in face of chaos

DISGRUNTLED noises being made offstage by other states over Ireland's unilateral move to offer State guarantees to banks last week sounded increasingly bizarre yesterday as more governments followed our lead, with varying degrees of commitment.

Germany and others were said to be annoyed with the Irish Government for going it alone by offering guarantees for all liabilities and underpinning them with legislation, rather than the political commitments being made elsewhere.

Diverse actions across Europe are being inspired by the perceived national interest of each member state, with the common aim of shielding banks and depositors from the crisis.

Did Brian Lenihan's solo run last week pre-empt some sort of joint European action that might have restored confidence more efficiently and in a more orderly fashion?

On the evidence, it seems far more likely that the Irish action shook some other governments out of an indecisive paralysis far more dangerous to the Union as a whole.

Is it possible at all that the 27 European Union countries -- or even the 15 in the Eurozone -- could act in unison in face of a financial crisis of the current magnitude? In the past week, campaigners against the Lisbon Treaty have been presenting the Irish action, a little too gleefully perhaps given the dire circumstances, as evidence of EU failure to provide leadership and the desirability of putting one's own interests first.

There is still time for EU leaders to take stock and demonstrate the power and effectiveness of co-operation.

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