The Cabinet is expected to sign off on lower Aer Lingus 2005 results today and get an update on plans for privatisation by June, but a final decision on a sale is unlikely to be taken. The looming pension deficit at the airline remains a central stumbling block.
Operating profits for 2005 have fallen almost 30 per cent to approximately €75 million, while turnover is down from the record figure of €906 million achieved in 2004.
The annual report and accounts points out that premium seating on short haul flights was removed in 2005 and fuel costs increased significantly. The airline also introduced a new simpler fares structure.
These are the final results before the airline is floated. The Government will sell a stake of between 50 and 60 per cent. It currently owns 85 per cent, but is determined to retain at least 25 per cent.
While the 2005 results will be disappointing, chief executive Dermot Mannion is forecasting a better performance in 2006, with operating profits rising to €85 million.
While fuel prices will continue to militate against the company in 2006, the number of passengers flown is expected to grow strongly and extra capacity is coming through via a new short haul fleet. The airline also has a new non-US long haul route to Dubai and is hoping to develop others.
The Minister for Transport Martin Cullen will update ministers on the sale process, a final decision to begin an initial public offering (IPO) process is unlikely, claimed sources last night. However the final go-ahead is not far away and could take place as early as next week. The advisors to the Government, UBS and AIB Capital Markets have told officials in the Department of Transport that in order to undertake an IPO by June a sale would need to get the go-ahead before St Patrick's Day.
The issue of the company's pension deficit continues to complicate the plans although the Government is likely to decide on an IPO first and deal with the pension issue later along with the airline. Unions remain opposed to any sale and SIPTU shop stewards are holding an emergency meeting this Thursday.
The unions yesterday received a presentation from their advisors, accountant Greg Sparks and ICTU economist Paul Sweeney. The union was told there was still no formal solution to deal with the pension problem.
SIPTU shop stewards from Cork, Dublin and Shannon will take part in that meeting. SIPTU's national industrial secretary, Michael Halpenny said yesterday that "even with a Government decision on the privatisation of Aer Lingus imminent, the situation with regard to the pension deficit is still unclear"
"Significant elements of the current business plan - including the numbers of permanent jobs - remain unresolved. We will have a full discussion with our shop stewards about the implications of any decision which affects our members terms and conditions".
