Aer Lingus has warned that profits in 2005 could be hit by rising oil prices

The airline's chief executive, Mr Willie Walsh, said while the airline remained on target for operating profits of about €95 million for this year, it would be difficult to maintain this performance in 2005.

Speaking in an interview with news agency Reuters, Mr Walsh said that, if oil prices remained high, pressure would mount on earnings.

"We had been projecting growth in profitability for 2005, but at this stage I would think that would be highly unlikely," he said.

The airline has hedged all its fuel requirements for 2004 and 68 per cent for 2005. However, Mr Walsh has emphasised that purchasing the remainder of its fuel next year could be costly. He has also said that rising fuel prices make it even more vital to reduce other costs.

Mr Walsh also expressed his frustration with aspects of State ownership and the consequent lack of access to fresh capital. "If we remain in State ownership it doesn't mean we're out of business, it means that, going forward, our ability to take advantage of opportunities will be significantly restricted," he said.

Mr Walsh and his management colleagues recently withdrew their own investment proposal for the airline.

The airline's focus at present is on organising a long-haul fleet renewal programme. Negotiations with Airbus and Boeing are active and formal offers have been submitted.

The airline needs between €200 and €300 million to advance a deal with either manufacturer.