The management of Aer Lingus have received board support for a three year plan that will continue the airline's metamorphosis from traditional flag carrier to low cost airline. Along the way another 1,300 jobs will be shed - or that is the target, at least - and activities such as baggage handling will be outsourced.
The objective is to give Aer Lingus a cost base that will allow it to compete with rivals like Ryanair and EasyJet who are set to dominate European aviation for the next decade. Up to another 10 European destinations could be added to Aer Lingus's schedules, with obvious economic benefits to the State. The position of the management is that this plan is the best way forward for the company, regardless of the outcome of the current review of its ownership. This issue is currently being examined by a Cabinet sub-committee chaired by the Taoiseach and follows a request from the senior management last month that they be allowed put together a funding proposal.
Although it was not explicitly stated, Mr Walsh and his colleagues are assumed to want to mount a management buy-out - or at least participate in an investment consortium which gives them a sizeable stake. All the possible options including flotation are now to be considered, with a decision due in principle by the autumn.
The reality is that the management's plan cannot be divorced from the issue of ownership. As things stand the completion of Aer Lingus's transformation to low cost carrier, as put forward by management, appears to be incompatible with continued long-term State ownership.
The sort of simple trade-off between profits and jobs that underlies the plan is not going to be readily acceptable to the company's unions, who have shown at Aer Rianta and CIÉ that they are capable of exerting considerable influence with the current owners: the Government. SIPTU and IMPACT have already indicated opposition to any attempt to force through the job cuts envisioned under the plan put to the board yesterday. Fortunately the company is on track to make profits of over €90 million this year and as such should have the resources to fund an attractive voluntary severance package. This should allow a reasonable deal to Aer Lingus staff who choose to depart; they have, after all, contributed to the turn-around in no small measure.
This may prove the solution to this particular impasse, but ultimately Aer Lingus will not be able to compete with the likes of Ryanair unless it has the same operational freedom. This has implications for its future ownership, as does the need to raise finance for the airline's future. Strategic issues, including the Aer Lingus landing slots in Heathrow and the air services available from the Republic, must also form part of the consideration. The first steps towards resolving this issue will be taken in the autumn. Final judgment will have to await publication of the plan but the company is at least pushing forward with ensuring the airline's long-term future, whatever the ownership structure.