Aer Lingus unions agree payroll cuts: Airline needs to slash pounds 50m in costs

AER LINGUS, the Irish airline, has reached agreement with union leaders on proposals to cut payroll costs by Ir pounds 21m ( pounds 20m) as part of an overall rationalisation plan to return the company to health. The deal, struck after all- night talks, includes changes to working practices, writes Mary Fagan.

Debt-laden Aer Lingus needs to slice its costs by Ir pounds 50m to qualify for a Ir pounds 175m cash injection from the Irish government. The aid plan is being investigated by the European Union on competition grounds, but aviation industry sources expect it to be cleared.

A spokesman for Aer Lingus said talks are still continuing on the other cost-cutting measures. It is seeking to reduce overheads by Ir pounds 15m and to save a further Ir pounds 14m at Team Aer Lingus, the company's maintenance unit.

Bernie Cahill, chairman of Aer Lingus, said: 'I am confident that the implementation of the targets set by the company will ensure that Aer Lingus emerges with a strong core business which will enable us to compete effectively in all our markets.'

Aer Lingus made a loss of Ir pounds 188m after exceptional costs last year, against a loss of Ir pounds 11.7m the previous year. It blamed the failed flotation of GPA, the leasing group in which the airline holds a stake, as well as declining yields per passenger and recession in its main markets worldwide. The operating loss was Ir pounds 44.7m after tax, which Mr Cahill said raised 'serious questions' about the future of the group.

Aer Lingus hopes to hear before the end of the year whether the EU will allow the injection of state aid. The EU is concerned that any help should be used to return the company to health and not to enable it to offer cheaper fares, particularly on the busy London-Dublin route.

It emerged last month that its rival, Ryanair, had decided against opposing the aid plan for Aer Lingus. However, it is asking the EU to attach stringent conditions to any state aid allowed.