Aer Lingus warns of further losses in 2009

Aer Lingus says it will make losses in 2009 on top of the €20m it expects to lose this year. In an interim management statement, the airline says work practices and pay rates at Aer Lingus are inappropriate given the level of competition the airline is facing.

Operating at a financial loss is not sustainable, the statement says, and the airline has to deliver cost savings if it is to flourish.

Aer Lingus says the €10 Irish airport travel tax announced in last month's budget will cost it €30m next year. The airline says it expects to absorb the tax on 75% of bookings because competitive pressures on fares will make it difficult to pass the cost on to customers.

Fare prices are falling and Aer Lingus expects average fares on short haul to decrease between 6-7% next year. It is also cutting the number of long haul planes from nine to eight for next summer.

It says that capacity for Winter 2008/2009 will fall year on year by 11% on long haul and by 1% on short haul. This is in contrast to earlier plans to grow long haul by 1% and short haul by 2%.

Aer Lingus says that while fuel prices have fallen recently, price reductions are being offset by a strengthening of the dollar, which has grown by 18% against the euro since mid-July.

In August, the airline said it had hedged 70% of its fuel requirements for the rest of 2008 at $1,137 per tonne and 20% of 2009's requirements at $1,165 per tonne. The group has since extended its hedging for the three months to December to 97% at a rate of $1,1086 per tonne and for all of 2009 to 64% at a rate of $995.

It has also hedged 18% of its 2010 fuel requirements at $936, it adds.

Last night the risk of travel disruption to Aer Lingus customers increased after SIPTU served two weeks notice of industrial action in objection to a management decision to outsource over 1,000 jobs. SIPTU today said it had accepted an invitation to attend the National Implementation Body tomorrow to seek a resolution to the dispute.

Aer Lingus says in the absence of ideas on alternative cost savings it has to proceed with the job cuts.

'In the context of the overall harsh economic and competitive environment, which is expected to deteriorate further in 2009, the group currently expects to report an operating loss for 2009,' the Aer Lingus trading statement says.

'Operating at a financial loss is not sustainable. Aer Lingus must now deliver the required level of cost saving measures to ensure the group is well positioned to grow revenue and profitability into the future,' it adds.

Aer Lingus shares were up a cent to €1.20 in Dublin this afternoon.