Aer Lingus facing record loss

By Andrew Bushe

DUBLIN — Labor unrest, foot-and-mouth disease and softening market conditions, particularly in the U.S., will mean that Aer Lingus will record a loss this year, Public Enterprise Minister Mary O’Rourke revealed last week.

While the unrest and the virus fallout could be considered once-off, the minister said there was evidence emerging internationally of a downturn in the aviation industry.

"The above factors, when combined with the significantly increased cost base as a result of recent pay settlements and higher fuel costs, are likely to result in the airline moving into a loss for 2001 even if there is significant recovery in performance over the remainder of the year," she said.

It had been expected that profits would fall from £60 million in 2000 to about £15 million this year, but trading conditions appears to have sharply worsened.

Figures released by the Association of European Airlines show a fall in passenger volumes for April 2001.

Speaking in the Dail on an opposition motion to abandon preparations for a trade sale of part of the company to another airline, the minister emphasized that the airline was not in a terminal crisis.

"Let me put on record that I do not intend to let such a crisis develop," she said. "Despite a welter of negative and sometimes misleading comment and the difficult trading conditions, Aer Lingus is a good company with an excellent brand."

She said successive governments planned a privatization to raise capital for the company as EU regulations prevented further subsidies.

A decision for an IPO "was heavily influenced by how best to position a small niche carrier like Aer Lingus to prosper and grow in an industry undergoing significant changes arising from alliance consolidation, ownership changes, increased competition from low-cost carriers and accelerated technological innovation."

The minister said it would be irresponsible not to consider all other options.

"Strong and resolute decisions are required in relation to the future direction of Aer Lingus, and unless these decisions are taken soon, less palatable choices could emerge which would not be in the interest of the airline, its customers or its employees," she warned.

"Aer Lingus is operating in an industry undergoing fundamental and dramatic changes and this new environment demands ongoing and significant adjustment.

"It is clear that changes in consumer attitudes toward travel, combined with shifts in the economics of the airline business, are placing the traditional national flag carriers such as Aer Lingus under increasing pressure.

"Across Europe governments have responded to these challenges by reducing or withdrawing from direct control and/or ownership of airlines. This includes British Airways, KLM, Lufthansa, Iberia, Air France, Alitalia, Swissair and Austrian Airlines."