Aer Lingus reached agreement with its union on a timetable for restructuring talks yesterday just as the aviation sector was hit by a fresh crisis. The implication for the struggling airline of the New York air crash was unclear but shares on quoted European airlines plummeted on the news, before recovering after reports that the cause was probably not terrorism.
Unions representing the 6,226 permanent Aer Lingus staff have agreed to conclude talks on the airline's rescue plan by November 28th. Balloting on any proposals that emerge will take place by December 7th. The company wants to shed 2,500 jobs and cut operating costs by 25 per cent in order to remain viable following the collapse in transatlantic and other international traffic post the September 11th attacks on New York and Washington. Yesterday's crash of an American Airlines Airbus taking off from Kennedy airport will be a further blow to the sector and Aer Lingus's efforts to stave off bankruptcy although the airline said yesterday that it did not expect its scheduled services to New York to be seriously disrupted. The longer term concern is the impact of the crash on US consumer confidence in air travel which is extremely fragile in the wake of the September tragedies. British Airways shares dropped 6.6 per cent on the news while Lufthansa lost 3.7 per cent. KLM Royal Dutch Airlines gave up 4.6 per cent and shares in Alitalia were suspended on the Milan bourse after falling 10 per cent.
"This puts a ceiling on any gains for airlines for the short term and they'll be trading in a very narrow range until a clear picture emerges on this crash and on the general economic outlook," said Lombard Odier fund manager Mr Riccardo Bindi in London.
"Even if this is just a normal plane crash it shows what the market would do if there was another attack. It shows how fickle sentiment is and shows that the market hasn't featured that in." Ms Hilary Cook, director of investment strategy at Barclays Stockbrokers, said the crash would be another blow for the travel and tourist industry. "It is yet another blow to an airline industry that is really struggling," she said.
However, assuming the crash was an accident and not terrorism, the long-term effect "shouldn't be that significant", she added. There would be significant short-term effects, she said.
The timetable for the Aer Lingus talks was proposed by the Labour Relations Commission, which will mediate between the company and unions. SIPTU shop stewards accepted the LRC proposals yesterday. Afterwards SIPTU national industrial secretary Mr Noel Dowling said the Government was adopting "an unduly conservative approach in its interpretation of EU rules on public investment".
"Since management and unions are now fully engaged in talks to save the airline, the Government would ultimately be expected to ensure resources were adequate to facilitate the conclusion of an agreement to save the thousands of jobs affected," he said.
IMPACT assistant general secretary Mr Michael Landers, who represents pilots and cabin crew, said there was "a lot of pressure on all sides to agree a rescue plan", but warned against the company seeking "gratuitous erosion of the terms and conditions of employees. It is important that these remain attractive enough for the company to retain its ability to recruit and retain staff in the future."
Iberia, the Spanish carrier became the latest European airline to announce poor results. It said that it would post an operating loss for the full-year to December 31st because of lower sales owing to a downturn in the airline industry. Demand dropped by 8 per cent in October from a year earlier, with premium passenger traffic plummeting by 25 per cent, Iberia said in a statement.
