Aer Lingus said yesterday it expected to turn a profit of around €40 million this year. In addition it has announced plans to radically overhaul business travel which will result in annual savings of €65 million for Irish firms.

Revenue in the current year is now expected to top €1.2 billion.

The airline's chief executive, Mr Willie Walsh, said that while the group was beginning to return to financial well-being it would be premature for workers to expect a reversal of pay freezes agreed under the carrier's survival plan.

The survival package is due to be reviewed in February but unions say the 4,000 Aer Lingus workers it represents are not willing to wait until then to receive deferred PPF wage increases of up to 12 per cent.

The airline risked fomenting unrest among staff if it was seen to be dragging its heels over pay at a time when it was returning to profit, said SIPTU branch secretary Mr Owen Reidy. He added: "The situation has changed dramatically.

"Aer Lingus is now making money again. There is now a very strong argument for workers to receive deferred pay increases ahead of schedule."

Some pilots have forgone a pay increase of 20 per cent.

Mr Walsh told the annual conference of the Small Firms' Association that while Aer Lingus had taken costs out of the business and was a much more productive organisation now compared with recent years, the group's turnaround was still a work in progress. He added that the company had "nothing to hide from our trade unions". "They understand the economics of the business," he said.

"The [pay freeze] will be discussed but it is too early to talk about it at this stage."

He added that in the post-September 11th climate the airline faced the prospect of losing €130 million this year which was revised to €27 million when its survival plan was unveiled last October. But a combination of reducing costs by €190 million, reducing staff by 2,000, freezing pay and "radical changes in work practices" had brought the carrier to its current position of forecasting €40 million in profits this year.

There is now a much greater utilisation of resources: nine new routes have been introduced with no additional resources. Mr Walsh added that the next tranche of cost cutting would result in savings of €130 million for the group. He said revenues had been increased after the sale of three million "cheap seats" many of which were now up to 60 per cent cheaper than in 2001. The price structure of tickets has been simplified and "some of the crazy restrictions" of the past abolished.

The company will announce a plan in mid-October to make it "easier and cheaper for Irish firms to do more business".

There will be a new pricing model announced for business tickets, reducing the cost of business travel in Europe by 60 per cent and resulting in annual savings of €65 million for Irish firms. Those reductions will be introduced on European routes.

More European destinations are currently being evaluated by the airline and it plans to reintroduce its route to Baltimore, Washington.

But that reintroduction will depend on Aer Rianta in Shannon waiving its landing charges, said Mr Walsh.