Bloxham: Aer Lingus must cut 800 jobs

AER Lingus must cut 800 jobs as urgent restructuring is needed at the airline, according to Bloxham Stockbrokers, which downgraded the airline yesterday.

Bloxham said in order to avoid a financial crisis at the airline, costs need to fall by a quarter to “bring unit expenses in line with competitors”.

It said that implies a €250 million reduction in ex-fuel costs and has to include a sharp 20% reduction in the group’s workforce, equivalent to 800 employees.

Bloxham Stockbrokers says the Aer Lingus Group could make an operating loss of €150m this year. Bloxham’s previous estimate was €130m, making it 37% worse than Bloomberg consensus forecasts.

“The Irish economy, on which Aer Lingus depends for about 90% of traffic, remains exceptionally weak. Sharp declines in consumer spending and the prospect of further expenditure cuts and tax increases make us wary about air travel demand,” it said.

Bloxham also said that the introduction of an air passenger departure tax of €10 per passenger from spring 2009 will have a “detrimental impact” on demand in winter 2009 and 2010.

“We expect Aer Lingus will fight against intense competition to sustain load factors by sharply cutting fares. As a result, yields on short-haul could fall 15% alongside a 20% drop in long-haul yields,” it said.

It said that from net cash of €757m at the end of 2007, cash could fall to less than €300m by early 2010.

“That is before any additional restructuring costs or any injections to the group’s growing pension deficit, which remains a contentious subject between the company and its unions,” the stockbroking firm said.

Aer Lingus shares closed down almost 3% yesterday to 49 cent.

Meanwhile, Ryanair yesterday called on the Minister for Transport Noel Dempsey to investigate what it called “security failures” at Dublin Airport.

It said long security queues yesterday and on Monday resulted in dozens of Ryanair passengers missing early morning flights.

It also claimed one passenger collapsed because of the lengthy waiting time.

Ryanair spokesman Stephen McNamara said: “Ryanair calls on the minister for transport to step in and investigate why passengers who are paying €15 to the DAA Monopoly to pass through Dublin Airport and €10 to the Irish Government to leave the country are missing flights due to repeated failures at the DAA monopoly run Dublin Airport.”

Mr McNamara said that 30 passengers missed flights at Dublin Airport yesterday adding that he suspects “many more missed flights but have now decided not to travel”.

However, Dublin Airport spokeswoman Siobhan Moore said that the airport had only one report of a passenger missing a flight yesterday and that was because she admitted going in the wrong direction.

Ms Moore said this woman collapsed when she came back through security after missing her flight because she was likely to have been “overwhelmed”.

Ms Moore said the 17 security desks at the airport are always fully opened.