Ryanair moved aggressively today to stem losses at its new Buzz subsidiary, saying it would shut down the carrier for a month and cut staff by as much as two thirds.
Ryanair also held out the prospect of closing the unit entirely if creditors and staff at Buzz do not agree to the cuts.
Ryanair said it would ground Buzz, which it purchased last month from KLM for 3 million, for the month of April, confirming reports earlier in the week that had surprised industry watchers.
It also said it would cut up to 400 of Buzz's 600 staff, get rid of four of its 12 planes and slash its route network in half, when it resumed service in May.
However, it said it would retain services to Berlin and two Spanish destinations - Murcia and Jerez - previously thought to be in jeopardy.
"The immminent threat of war in Iraq, the downturn in European economies and increasing intense competition from other low fare airlines in the German and French markets means that Buzz is currently losing in excess of one million s per week," Ryanair said in a statement. Shares in Ryanair were down 0.8 per cent at 6.15 this morning in an overall weaker market.
Analysts were taken aback by the size of the staff reductions, which previously had been rumoured in the area of about 100, and by the unusual move to ground Buzz for a month.
"It's a lot sharper than the cuts that had been originally expected, but they needed to take more radical surgery," said analyst Mr Shane Matthews at NCB Stockbrokers. Union officials reacted cautiously to the announcement.
The trade union representing cabin crew said it had a big membership at Buzz but its new owner Ryanair had kept it in the dark over its plans and not yet agreed to meet union officials.
"We want to see the actual clarity as opposed to the headlines," Transport and General Workers Union spokesman Mr Andrew Dodgshon told Reuters, adding the union was meeting with Buzz management tomorrow.
Analysts said any union unrest at Buzz was unlikely to spread to the wider Ryanair network, which has thus far remained non-union.