New Aer Lingus chief inherits tough challenges

Dermot Mannion takes up the post of chief executive at Aer Lingus today as advisers begin to assess the privatisation options for the airline.

The former Emirates executive faces a number of immediate challenges, including rising fuel costs and the failure of the airline to introduce new work practices, which are already undermining profitability at the State airline.

Aer Lingus is now expected by industry sources to report profits of around €50 million this year, less that half the amount originally forecast.

Mr Mannion has already indicated that his strategy for the airline will be built around development of its long-haul operations.

However, stalled negotiations with cabin crew over more flexible crewing arrangements have only recently opened.

The airline blamed the failure to secure concessions from cabin crew on rostering for its decision to abandon a recently introduced route to Florida in May.

Aer Lingus is also facing competition in Mr Mannion's chosen path to growth with the announcement by Gulf Air of its intention to operate a route from Dublin to Bahrain from December.

In any case, the funding of a long-haul fleet is dependent on the partial privatisation of the airline. While the Minister for Transport Martin Cullen is keen to expedite the process, the incoming chief executive estimates that any deal is unlikely before the second half of 2006.

"I anticipate it will be 2006, most likely the second half of 2006," Mr Mannion said to The Irish Times in an interview last month. Even that, he commented, was a "tight timescale".

The timing of any sale could also be affected by an impending general election. While sources close to the Minister insist the issue will be determined by advisers appointed last week on business and market grounds, not political issues, there remains significant uncertainty - particularly over the commitment of the Taoiseach, Bertie Ahern, to the politically-sensitive proposal so close to an election due in 2007.

Mr Cullen yesterday welcomed Mr Mannion's official arrival in his post.

"With the Government decision on funding, the appointment of advisers to advise on and execute the transaction and now Dermot Mannion taking up office as chief executive, three key moves have been taken to position Aer Lingus for growth."

He said significant progress had been made in recent years in turning around the fortunes of the State airline and paid tribute to the board, management and staff of the company for their efforts.

However, he warned that there was more to do. "Achieving an appropriate cost base and the operational flexibility to support sustainable growth will be essential," he said.

"Aer Lingus operates in a volatile and ever-changing environment which requires the company to function as efficiently as possible with maximum flexibility to compete," Mr Cullen said, adding that it was important to move away from the crisis plans of the past.