Cutbacks will avoid a ‘downward spiral’
Outlining the need to slash costs to ensure the viability of the embattled airline, Aer Lingus chief financial officer Sean Coyle said the company would live with strike action if it needed to in a bid to push through the measures.
As staff reeled from news of 676 job losses and changes to pension arrangements and flight routes, Mr Coyle said the measures were needed to avoid a “downward spiral” which could ultimately shrink the airline even further.
Banded wage reductions of up to 10% for staff whose basic pay is more than €35,000 will be introduced to save just short of €100m. Some 75% of savings will come from staff areas.
The plan would see 489 staff jobs go in Stage one, which the airline hopes to have agreement on by November 18, a target date Mr Coyle felt was realistic.
It would mean 100 pilots, 229 cabin crew, 110 ground handlers and 50 back-up staff losing their jobs. Stage two would then see a further 187 positions go in administration and middle management areas.
Corporate affairs director Enda Corneille said “it is simply a matter of having too many staff”. The airline has 460 pilots.
The job losses are likely to be focused on long haul flights which the airline says are not profitable. The number of aircraft operating long haul routes will be cut from five to four, with a reduction for next summer from seven aircraft to five.
Disused aircraft are likely to remain on the ground, Mr Coyle said. No long-haul route is profitable, he said, and all routes will be reviewed if the measures are not accepted, which could lead to the routes being “significantly scaled back next year”.
Long-haul flights from Shannon will come under “increased scrutiny”, with staff at that airport.
Mr Coyle said 70% of the company’s losses in the first half of this year were attributable to long-haul routes. Closer to home, Belfast and Gatwick have lost money, although the latter has seen improved performance.
Regarding the possibility of industrial action over the plans, Mr Coyle said: “There is a lot of emotion out there today, there is a lot of anger. There is trust to be built on both sides. If there is industrial action we have to live with that.”
On the pension plan, Mr Coyle said there needed to be a break from the defined benefit scheme which is shared with the Dublin Airport Authority and SRT Technics.
In future, he said, there would be a defined contribution scheme, although he conceded: “There may well be a conflict with how the Pensions Board views the scheme but the difficulty for the company is that it cannot afford to pay more.”
The airline wants to reduce its liability on its current scheme, which could otherwise end up as a deficit on the balance sheet.
Existing staff will receive the benefit of the defined benefit scheme up to now, and will have a defined contributions scheme in future.
“We clearly want to break the link with the other two companies in the scheme,” he said.
He said the airline will use the new T2 terminal at Dublin airport only if it is at the same charge as the rest of the airport. A new base is likely in 2011, either in Britain or Europe, but not next year.
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