Aer Lingus unveils restructuring plan, aims to slash €97 million in yearly costs

Posted 08/10/2009

Aer Lingus yesterday revealed a two-phase "transformational" restructuring plan to reduce annual operating costs excluding fuel by €97 million ($142.7 million) before the end of 2011 and remove "legacy work" practices from its operation.

EI also will use an Airline Operating Certificate in the UK to decrease its current dependency on the Irish consumer. Phase one of the plan will target operational cost reductions and changes in work practices in both the short-haul and long-haul networks, though the bulk of cuts/reforms will fall on long-haul operations. The second stage of the plan will focus on a series of initiatives to deliver revenue growth, improved customer service and further cost savings through business process improvements.

"The outlook in each of our current core markets is poor and, in line with the macroeconomic outlook, we do not expect any near-term recovery," CEO Christoph Mueller said. "Against this backdrop, Aer Lingus cannot continue with an operating cost base which is structurally uncompetitive when compared to that of its closest peers."

About €74 million in cost savings will come from its workforce through a reduced head count, cuts in pay for employees whose basic pay exceeds €35,000 annually and reduced variable pay and staff allowances. Another €23 million will come from nonstaff cost savings. Its workforce numbering 3,879 will be reduced by 676, cuts that are in addition to the approximately 100 staff reductions announced last month.

EI said it hopes the redundancies will be achieved on a voluntary basis or through releasing fixed-term staff at the end of their contract period, but warned that it "reserves the right to reduce staff numbers on a compulsory basis if agreement on changes with staff cannot be reached. In addition, if it is not possible to deliver the required cost savings in line with the plan, and within the required timeframe, it may be necessary to reduce staff numbers further in order to ensure the continued viability of Aer Lingus."

Separately, EI said passengers carried rose 4.1% year-over-year in September to 960,000 despite a 20.4% decrease in long-haul passengers. Short-haul passengers lifted 7.4%.

by Cathy Buyck

Originally published 9 Oct 2009 at: http://feeds.atwonline.com/~r/AtwDailyNews/~3/yxg5qXg4mRA/story.html