AER LINGUS could record an operating loss of up to €55 million if fares continue to be driven down by the recession, the company warned analysts yesterday after publishing its 2008 full-year results.

The airline’s net cash pile could also dwindle to €400 million by the end of 2009 from a level of €653.9 million at the end of last year as it pays for fleet replacement and the €120 million cost of funding its latest redundancy programme.

Aer Lingus told analysts yesterday its workforce would be reduced by a net 200 this year relating to a deal struck with unions in 2008.

This bleak guidance from the company resulted in Aer Lingus’s share price falling by 26 per cent in Dublin yesterday to just 58 cent. It has a market value of €310 million.

While Aer Lingus’s 2008 revenues rose by 5.6 per cent to €1.36 billion the company recorded an operating loss, before exceptional items, of €17.6 million.

The company earned €38.8 million from its large cash war chest to give it a pre-tax profit, before exceptional items, of €21.2 million.

But exceptional charges of €140.9 million meant Aer Lingus reported a hefty loss before tax of €119.7 million. The exceptional items comprised a €117.5 million redundancy charge from the 2008 deal with staff and €17.5 million in compensation payments under the PCI-07 programme of cuts.

Aer Lingus also spent €5.9 million on defence costs relating to Ryanair’s failed bid last December. It has spent €30 million defending itself against Ryanair’s two bids.

Aer Lingus’s net cash declined to €653.9 million from €757 million a year earlier.

Aer Lingus carried 10 million passengers in 2008, up 7.5 per cent on the previous year.

The airline said it expected its long-haul passenger number to decline by 10 per cent this year, with a 5 per cent rise in short-haul traffic driven primarily by the launch of its new base at Gatwick in the coming weeks.

Aer Lingus said it had taken 140,000 advance bookings for its Gatwick base. “Early indications on bookings are positive,” Mr Mannion said.

The airline’s average load factor declined to 72.8 per cent last year from 75.4 per cent in 2007.

Short-haul fares declined last year by 6.4 per cent, while long-haul fares were up by 2.6 per cent on average.

Ryanair yesterday accused Aer Lingus of misleading shareholders in its defence document last December by claiming it would produce a “profit overall”for 2008 and claims made in relation to fuel costs and growth in its long-haul business.

Mr Mannion rejected this criticism. “We always made it clear that this was a pre-tax, pre-exceptional profit, and that’s what we have delivered.”

Ryanair said it would lodge “formal complaints” to the London and Irish stock exchanges, the Takeover Panel and the Financial Services Regulator about the “patently false claims and misleading advice” given to shareholders.

Aer Lingus said its revenue would decline in 2009. It added that customers were booking later and its premium long-haul business was under pressure.

It expects fares to decline by 10 per cent or more this year.

Mr Mannion said Aer Lingus could withstand the recessionary pressures. “We are very well positioned to come out the other end. The balance sheet is and will remain strong. However long it lasts (the recession], Aer Lingus will be one of those surviving the recession, there’s no doubt about that.”

Davy aviation analyst Stephen Furlong described the results and outlook as “pretty poor”. He is forecasting an operating loss for 2009 of “slightly over” €40 million.