Aer Lingus has confirmed plans to cut 676 jobs as part of a restructuring plan aimed at reducing annual operating costs by €97 million before the end of 2011.
The troubled airline, which currently employs 3,900 staff, this morning announced that it intends to roll-out its plan on a phased basis and stressed that the majority of redundancies would be sought on a voluntary basis.
However, Aer Lingus added that it reserved the right to reduce staff numbers on a compulsory basis if agreement with unions cannot be reached on jobs cuts.
In a statement this morning, Siptu said it could not see any basis for "further draconian measures" at the company. The State's largest union said it would consider the implications of the Aer Lingus plan, but national industrial secretary Gerry McCormack said that job cuts "seem to be extreme and draconian and an over reaction" to the current difficult economic climate.
“On the basis of the statement by the company today we cannot see any basis for pay cuts, job losses or changes to the pension scheme on behalf of Siptu members,” he said.
Siptu plans to call a national meeting of its shop stewards early next week and the union said it would be seeking clarification from management on the proposals ahead of that meeting.
Trade union Impact also described the cuts as "savage and severe."
Unite, which represents skilled technical workers at Aer Lingus, said it would "resist any attempt to impose job cuts or change the conditions on which its members are employed without prior negotiation and agreement".
“We will listen to proposals aimed at maximising jobs at the airline but any changes will have to be negotiated and agreed by our members,” said Unite regional officer Brian Gormley.
Aer Lingus said its restructuring plan involves achieving cost savings of €74 million and non-staff cost savings of €23 million. In addition to reducing headcount the airline said it was necessary to "fundamentally change" so-called legacy work practices and would be seeking an average 10 per cent pay cut for staff whose basic pay exceeds €35,000 a year.
It said that a reduced flight schedule and changes to work practices will lead to 489 redundancies in operational and support areas. These cuts are in addition to the departure of 100 staff this year, including 63 temporary cabin crew who were let go last month.
The airline warned it might seek additional redundancies in staff working in its front-line operations if the required costs savings cannot be achieved within the required time frame.
Aer Lingus said it is also seeking to cut a further 187 positions from its back office and headquarters operations, reducing headcount at its head office by 40 per cent by 2011.
"While the board of Aer Lingus recognises that staff cost savings have been delivered across many areas of the business in previous years, an objective analysis shows that, operating costs and, in particular staff costs do not reflect current and expected trading conditions and are significantly out of line with peers. Therefore the proposed changes are necessary to better align operating costs with those of Aer Lingus’ competitors," it said in a statement.
Under its restructuring plan, non-staff costs will be reduced by €23 million next year. These savings will be derived from areas such as airport charges, distribution, reduced direct operating costs, maintenance and overheads and will build upon the €26 million delivered in 2009 in these areas.
The airline is also intending to replace its defined-pension scheme in a further bid to reduce expenses.
Aer Lingus said it will now begin a six-week consultation period with unions and employees over the restructuring plans.
"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. Against this backdrop, Aer Lingus cannot continue with an operating cost base, which is structurally uncompetitive when compared to that of its closest peers. A significant differential in operating cost is not sustainable," said the airline's chief executive Christoph Mueller.
"Our plan to reduce our operating cost base and change work practices will secure Aer Lingus’ future as a viable and strong airline that can prosper in one of the most competitive travel markets in the world. We regret the impact that the proposed plan may have on our employees, however, we must transform the business now to ensure that Aer Lingus has a business model for the long-term and can deliver value for all stakeholders," he added.
Its shares jumped 16 per cent in early trading and were up 7.7 per cent at €0.77 by 8.40am. However, shares retreated in the afternoon to €0.74.
"It's what's needed ... but the key is implementation. If implemented, it should go some way to reducing and removing the cash burn in the company," said Stephen Furlong, an analyst at Davy Stockbrokers.
