Strategic alliance is the name of the game at Aer Lingus. Management is in discussions with three potential strategic alliance partners for its TEAM Aer Lingus subsidiary and is also investigating alliance options for the group itself.

The challenge now for management is whether it can chart a future for the airline, at a time when consolidation and alliances are the order of the day internationally in all parts of the industry. In much the same dilemma as faced Telecom Eireann's management, it must try to both get its house in order and find a partner, at a time when all the big players are somewhat diverted in forming their own mega-alliances.

One hurdle has been overcome, with the staff voting in favour of a plan drawn up by former prominent trade unionist Phil Flynn to agree to a 5.5 per cent pay increase, in return for entering into talks on £50 million in cost savings over five years. The problem now for management is that it still has to get agreement with unions on where the savings will be found. So far the agreement looks like a real coup for the unions.

Despite the reasonable profits being earned by the airline pre-tax profits of £41 million last year there is no doubt that savings are needed. NCB warned in a report on the airline prepared for Mr Flynn that "early warning signs of a group in financial difficulties are starting to appear". Margins must be pushed up if the group is to survive the next downturn in the sector and, crucially, to fund future investment in new aircraft.

An alliance involving a partner taking an equity stake would provide one source of new capital. But as yet it is unclear what type of alliance or alliances may be in prospect for the airline.

One option is a deepening of the kind of code-sharing links the airline has forged with US giant Delta; the other is a sale of some of the company's equity in a similar fashion to Telecom Eireann. But whatever type of alliance is in prospect, the airline must first show that it can meet competition from Ryanair on the key routes to Britain and Europe its presence on these routes is, after all, the key attraction for any partner.

A strategic alliance is also vital for TEAM, as it needs to become part of a larger international maintenance operation in an era when this industry is following other sectors of the airline business into an era of consolidation.

Here the key industrial relations issue is letters of comfort guaranteeing 1,100 of the 1,550 staff that they are effectively Aer Lingus employees. The only way to end these would appear to be through some kind of a pay-out to the employees involved.