Aer Lingus cash reserves to run out in January

Aer Lingus is expected to run out of cash reserves by January or February next year, at the latest. The Minister for Public Enterprise, Ms O'Rourke, said the airline had confirmed yesterday that transatlantic bookings had collapsed.

They were down 80 per cent on last year and these routes account for 60 per cent of the airline's profits. The company was also predicting losses of £70 million this year and £100 million in 2002.

Cash reserves had also dropped by £115 million to £185 million. Her comments came as the Fine Gael leader, Mr Michael Noonan, called for Aer Lingus to be divided into two airlines, one serving transatlantic routes and one serving Europe.

He said the application for EU Commission approval to give State subsidies could be confined to the transatlantic routes and the case "might be based exclusively on the precedent created by the US administration" which is giving State support to three airlines flying into Ireland.

Both were speaking during a tense Dβil debate on the future of the national airline during which the opposition was trenchant in its criticism of the Minister and the Government for their handling of the airline and the now set-aside flotation plan.

During the three-hour Private Members' debate, deputies in constituencies connected to the main airports repeatedly stressed the devastating impact on their regions if the airline's viability is not secured.

Ms O'Rourke told the Dβil she believes the company has a future, "but securing the future will require a major change in the structure and focus of the airline and significant changes for management and staff".

Confirming the company's grave situation, the Minister said the September 11th attacks had a dramatic impact. As well as the 80 per cent drop in transatlantic bookings, forward bookings to December, were expected to be down by 45 per cent on last year.

Bookings were also down on the European routes with a drop of 30 per cent on last year and forward bookings likely to be down 10 per cent.

She denied suggestions that the company had significant cash reserves and usable reserves had dropped from £300 million to £185 million because of aircraft costs and depressed trading performance.

Operations were being cut by 25 per cent with the elimination of the six weekly flights to Newark and the daily Baltimore flights. "This means that the cost base must also be reduced by a minimum of 25 per cent."

Some 700 temporary staff were being let go and the company had to look at the implications for permanent staff of the 25 per cent cut in scale.

Ms O'Rourke said she stressed during meetings with the EU Commission and the EU Transport council President, Ireland's unique situation as an island nation in the EU with no direct land link to the continent and the importance of the national airline.

She said the company had operating profits of £63 million in 2000, but along with the catastrophic effects of the September 11th attacks, industrial relations disputes, the foot-and-mouth crisis and global economic downturn were beginning to have an impact.

However, Mr Noonan condemned the Taoiseach and the Minister's handling of the airline and in particular the flotation plan for Aer Lingus. It was "hardly surprising the airline went from crisis to crisis".

Labour's Public Enterprise spokesman, Mr Emmet Stagg, said there had been no recognition of the damage that the policy to sell the airline had inflicted on the company over many months. "Neither is the policy jettisoned, it is and I quote 'not now an issue in the current circumstances'."

Deputy Jan O'Sullivan warned of the implications for the Shannon region if the airline did not survive and said strategic access was vital to the national interest. "In the mid-west, the ripples extend much further than the airlines ." The Opposition motion condemning the Government's handling of the airline was defeated by 67 to 53 votes.