The Guvnor
4th Nov 2001, 13:55
From today's Sunday Times:
Aer Lingus is set to collapse,
warns Ahern
Fiona McHugh
AER LINGUS, the cash-strapped state airline, could be shut down as early as this week, the government has warned.
At a meeting last Wednesday, Bertie Ahern, the taoiseach, told union bosses that company directors would have no choice but to "call it a day" when the board convened on Thursday if significant progress was not made on a rescue plan before then.
The message has prompted a series of meetings between the company and its unions, and a deal between the two sides now looks likely.
Aer Lingus managers, assisted by a team of company doctors, recently devised a survival package that involves more than 2,000 workers losing their jobs and 25% of the airline's routes being chopped. The company's unions refused to agree to the plan, however, saying the £40m redundancy offer was too meagre.
Ahern was said to have adopted a robust approach at last week's meeting, spelling out the consequences of ongoing opposition to restructuring. The taoiseach said the company's directors could be found liable for reckless trading if they continued to do business without any prospect of cost-cutting measures being implemented. Aer Lingus is gobbling cash at a rate of £2m a day and could run out of money as early as January.
This weekend the airline dropped plans to farm out some of its business, persuading unions to enter negotiations on restructuring. Aer Lingus had hoped to outsource catering, information technology, loading and aircraft cleaning to four newly created subsidiaries, but the measures were resisted by workers' representatives.
With the European commission refusing to yield on the issue of state aid, the airline's options are limited.
Its directors could call in an examiner, who would be charged by a court to take measures to save the company or close it. That, at least, would take the airline's problems out of the political realm, and it might also help to persuade Brussels that it is indeed in danger of folding.
Under competition law, state aid may be granted to a public company if it is bankrupt. On the downside, it would make it
difficult for Aer Lingus to continue trading as normal. Appointing an examiner would make creditors nervous, prompting some to refuse to do business with it for fear they might not be paid.
Alternatively, unions and their members could agree to the rescue package, but that would mean accepting attendant redundancies and changes to work practices.
This option would probably allow the airline to survive without a cash injection from the government and give it a better chance of attracting private investors.
The government also appears to be acknowledging the need to create a low-fare air hub in Ireland. There are indications it will move to break Aer Rianta's monopoly, paving the way for new no-frills routes to Europe.
Michael O'Leary, Ryanair's chief executive, is seeking permission to build a second terminal at Dublin airport. If he gets the go-ahead, the company says it would lay on cheap flights to eight European destinations, six from the capital and two from Shannon. That would bring an estimated 1m extra tourists into the country next year.
Industry representatives claim the September 11 attacks, which have deterred people from flying, could lead to the loss of 14,000 tourism jobs in Ireland in 2002. In an uncharacteristic display of reticence, O'Leary refused to comment on a meeting he had with the taoiseach last week or on the prospects of reaching a deal. His silence could indicate that concessions are possible.
Aer Lingus is set to collapse,
warns Ahern
Fiona McHugh
AER LINGUS, the cash-strapped state airline, could be shut down as early as this week, the government has warned.
At a meeting last Wednesday, Bertie Ahern, the taoiseach, told union bosses that company directors would have no choice but to "call it a day" when the board convened on Thursday if significant progress was not made on a rescue plan before then.
The message has prompted a series of meetings between the company and its unions, and a deal between the two sides now looks likely.
Aer Lingus managers, assisted by a team of company doctors, recently devised a survival package that involves more than 2,000 workers losing their jobs and 25% of the airline's routes being chopped. The company's unions refused to agree to the plan, however, saying the £40m redundancy offer was too meagre.
Ahern was said to have adopted a robust approach at last week's meeting, spelling out the consequences of ongoing opposition to restructuring. The taoiseach said the company's directors could be found liable for reckless trading if they continued to do business without any prospect of cost-cutting measures being implemented. Aer Lingus is gobbling cash at a rate of £2m a day and could run out of money as early as January.
This weekend the airline dropped plans to farm out some of its business, persuading unions to enter negotiations on restructuring. Aer Lingus had hoped to outsource catering, information technology, loading and aircraft cleaning to four newly created subsidiaries, but the measures were resisted by workers' representatives.
With the European commission refusing to yield on the issue of state aid, the airline's options are limited.
Its directors could call in an examiner, who would be charged by a court to take measures to save the company or close it. That, at least, would take the airline's problems out of the political realm, and it might also help to persuade Brussels that it is indeed in danger of folding.
Under competition law, state aid may be granted to a public company if it is bankrupt. On the downside, it would make it
difficult for Aer Lingus to continue trading as normal. Appointing an examiner would make creditors nervous, prompting some to refuse to do business with it for fear they might not be paid.
Alternatively, unions and their members could agree to the rescue package, but that would mean accepting attendant redundancies and changes to work practices.
This option would probably allow the airline to survive without a cash injection from the government and give it a better chance of attracting private investors.
The government also appears to be acknowledging the need to create a low-fare air hub in Ireland. There are indications it will move to break Aer Rianta's monopoly, paving the way for new no-frills routes to Europe.
Michael O'Leary, Ryanair's chief executive, is seeking permission to build a second terminal at Dublin airport. If he gets the go-ahead, the company says it would lay on cheap flights to eight European destinations, six from the capital and two from Shannon. That would bring an estimated 1m extra tourists into the country next year.
Industry representatives claim the September 11 attacks, which have deterred people from flying, could lead to the loss of 14,000 tourism jobs in Ireland in 2002. In an uncharacteristic display of reticence, O'Leary refused to comment on a meeting he had with the taoiseach last week or on the prospects of reaching a deal. His silence could indicate that concessions are possible.