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Aer Lingus awaits EU ruling

February 16, 2011

By Staff Reporter

By Andrew Bushe

DUBLIN — A decision on whether the EU will ease rules on state aid to airlines this week will be crucial for the crisis-hit Aer Lingus as it struggles with a doomsday plan to shed 40 percent of the workforce while it loses more than _2 million day.

Company executives and the Irish government have been emphasizing how vulnerable the airline is in the wake of a collapse in business following the Sept. 11 U.S. terror attacks.

“It will be the kiss of death for the company if we do not proceed with restructuring,” warned Public Enterprise Minister Mary O’Rourke.

In a letter to staff, acting Group Chief Executive Larry Stanley said: “The losses we face are truly staggering. They exceed anything we ever anticipated in Aer Lingus and right now it is survival that is our challenge.”

The ailing airline has a target of about 2,500 redundancies out of 6,300 permanent employees in a survival plan that aims to achieve savings in costs of at least _130 million a year.

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It is also laying off 700 temporary staff, not paying a 5.5 percent increase that is part of the national incomes deal, canceling training and capital projects and embargoing non-vital expenditure.

Last month, the airline cut schedules by 25 percent and cancelled a number of trans-Atlantic and European routes.

O’Rourke said the airline is “hemorrhaging” cash. Without action, the company will run out of reserves early next year. It is forecasting a loss of _74 million this year and up to _130 million in 2002.

At stake also is the Shannon stopover rule. Continental and Delta are believed to be lobbying for the scrapping of the 50:50 rule, requiring each plane that flies the trans-Atlantic straight into Dublin to be matched by a flight into Shannon.

O’Rourke has pledged to protect the stopover and Shannon’s future, which is vital to the Midwest region. The EU has been keen to scrap the rule and O’Rourke said Brussels has suggested it be dumped twice in the last four years.

“I was the only dissenting member of all the member countries,” she told the Dail

In addition to battling for Shannon, O’Rourke will be seeking help from her fellow EU transport ministers for a more liberal stance to be taken on state support with permission to fund costs of layoffs and guarantee loans.

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