Aer Lingus In Serious Trouble

Wed Oct 17, 2001 2:24 am

From BBC News;

European Union transport ministers are meeting in Brussels, with pressure mounting to authorise cash injections for Europe's troubled airlines.

Ireland's Aer Lingus has warned its own employees that the company's survival is in doubt.

And the French government wants the go-ahead for a $275m emergency package for its own airlines.

Aer Lingus has told its own staff that it faces "staggering losses".

It is thought the airline - 95 % owned by the Irish government - does not have the money even to pay the costs of redundancies.

Gloomy outlook

The Irish authorities are desperately trying to persuade the European Commission to allow an emergency injection of cash.

But analysts say a short term bail-out might only mask the airline's long running difficulties.

"In the next four to five years the position of Aer Lingus is not going to be the position of a profitable airline," explained Stefano Sala, Airline Strategist at Roland Berger.

"It is going to be requiring a massive injection of cash. The only way they have to alleviate the situation is to reduce their dependence on the North American route, which is not going to be easy."

Even if Aer Lingus manages to reduce its exposure to the transatlantic market, its problems closer to home remain.

The carrier shares a Dublin hub with Ryan Air, the budget carrier, which has been consistently profitable and continues to grow at the expense of its state-owned rival.

Aer Lingus is losing more than $2m a day and has already made more than 2,500 staff redundant.

Experts warn that unless the Irish government finds a way to inject more emergency cash, the airline's very survival is in doubt.

US lead

At Tuesday's meeting in Brussels, Irish representatives will argue that, if the US can subsidise its airlines, Europe should be allowed do the same.

French and Belgian ministers will also present plans to prop up their national carriers.

"It is too early to tell whether the commissioner will allow further subsidies to take place, and obviously they are looking quite carefully at the situation across the Atlantic," said Gerd Zonneveld, European Transport Analyst at West LB Panmure.

"If it is found that US carriers are using the funds available to them from the US government to subsidise fares across the Atlantic then I suspect the European commissioner might do something about."

In the longer term, the European market may only be able profitably to sustain three big national champions: Lufthansa, Air France and British Airways.

However, progress towards such consolidation will require a major overhaul of regulation, subsidy and attitude.

And at the moment, national governments will do all they can to stop their airlines going under.

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