Losses for Aer Lingus are believed to be less severe than the worst fears for the aviation industry after September 11th. But the restructuring plan is seen as crucial to the airline's survival, writes John McManus
Aer Lingus said yesterday that it was not facing any immediate cash crisis, despite its decision to shut down operations from Friday until further notice.
Both the airline and the Department of Public Enterprise denied reports that the company was considering examinership or some other route to seek protection from creditors. The airline is budgeting to lose €27 million this year, even after the full implementation of its restructuring plan. Every day it remains closed will cost an additional €2 million.
The extent to which its banks would be prepared to support this sort of deterioration in the company's position is a critical factor in the management's ability to face down the striking pilots. The projected loss for this year was based on a worst case scenario drawn up in the immediate aftermath of the September 11th attacks on New York and Washington. The downturn in the aviation industry has proved to be less severe thamost predicted at the time. Aer Lingus sources were not prepared to concede yesterday that this meant the airline's financial position was stronger than expected. However, the sources were adamant that there was no immediate threat of bankruptcy.
The Aer Lingus board came close to seeking bankruptcy protection from the courts late last year when it appeared the employees would not sign up to the radical restructuring proposed by management. The company's directors decided not to proceed with the appointment of an examiner because they felt there was a reasonable prospect that the airline could trade out of its difficulties, provided the restructuring plan was implemented in full.
The issue may have to be revisited if the airline remains closed for a prolonged period. "I don't want to say everything is rosy in the garden, but there is not an immediate cash crisis," said a senior airline source.
If it went into examinership the airline would have up to 90 days to try and reach agreement with its banks and creditors on a further restructuring plan. However, the damage to the airline's reputation would be considerable, as would the embarrassment caused to the Government, its shareholder.
Last year the airline lost just under €200 million, but was projected to make a small profit next year. However, this assumed the full implementation of a restructuring plan, involving the loss of 2,026 jobs including 156 pilots, and no further disruption.