Strike threat weighs on Aer Lingus

Aer Lingus reported a €61.1 million (£50.5 million) operating profit for 2013, down 11.6% on the amount it generated in 2012, while the €750 million deficit in the Irish airlines pension fund weighs heavily on progress.

Chief executive Christoph Mueller today warned that the airline is not prepared to defer business initiatives any longer and will press ahead with strategies 'on service and cost' while it works out a resolution of the pensions issue that has threatened a strike at the country's three main airports.

This includes an imminent start on its Cost Optimisation and Revenue Excellence programme, with a target of cutting costs by €30 million from job losses and increased productivity, and improving its website and mobile app. It also plans to upgrade its long haul business class with the introduction of horizontal lie-flat seats.

The Irish Aviation Superannuation Scheme covers staff in Aer Lingus and the Dublin Airport Authority, and last week staff were told they will lose up to a quarter of their expected pension benefits after a meeting between the trustees, management and unions. The airline has refused to improve its offer of a one-off €140 million sum to restructure the pension scheme.

In today's statement, Aer Lingus said the measures it hoped to push through to reduce the deficit include staff working for extra years, reducing pensions in payment to the maximum extent permitted, the removal of statutory revaluation, and a further reduction of 20% in accrued benefits for active and deferred members. Deferred members who previously worked for the company and have moved to other jobs could lose up to 50% of their benefits.

SIPTU is the only union that has so far voted to take strike action, but representatives of the other unions involved are balloting for a strike. ICTU Industrial Officer Liam Berney has said there is a real prospect of Aer Lingus and the airports at Dublin, Cork and Shannon shutting down simultaneously, possibly over the St Patrick's Day period.

The deficit is a major obstacle to the government's plan to sell its 25% stake in Aer Lingus, as well as to the company's efforts to build alliances to develop its business.

The figures announced today were in line with a revised forecast the carrier issued last September after a profit warning. Revenue last year rose 2.3% to €1.42 billion from €1.39 billion in 2012, with long-haul revenue climbing 11.1% to €381.6 million, and passenger numbers on transatlantic routes up 12.2%. Revenue from short-haul services were hit by the good summer weather, and slipped 3.3%. Average fare revenue per seat rose 2% to €90.43. The balance sheet remains strong with gross cash of €897.4 million at year end and an 11.4% increase in net cash to €419.8 million.

"2013 was the first year of significant growth for Aer Lingus since the global economic downturn," Mueller said. "We added 11.6% additional capacity to our mainline long-haul network and more than sold this... We also successfully commenced contract flying operations and as a result, increased our short-haul fleet by four aircraft."

During the period, the company launched the contract flying business, with "Little Red" domestic UK services on behalf of Virgin Atlantic Airways and a long-haul service from Scandinavia to the Caribbean for the tour operator Novair. It also has expanded codeshare agreements with United Airlines and Air Canada, and plans an expansion in long haul this year with new services to Toronto and San Francisco and increased frequency on services from Shannon to Boston and New York.

In the retail arena, initiatives include enhanced meal offerings, wi-fi on transatlantic services and new checked baggage options.

The company announced a dividend of four cent per share for 2013, in line with the previous year.