Aer Lingus begins restructuring talks as bankruptcy looms

Restructuring talks began in November 2001 between trade unions and management at the Irish state-owned airline, Aer Lingus, which is seeking over 2,000 redundancies with the threat of closure within months if agreement cannot be reached.

In November 2001, the crisis at the Irish state-owned airline, Aer Lingus– brought on by a combination of the air travel slump after the 11 September terrorist attacks on the USA and pre-existing difficulties – reached a crucial stage, with the start of serious negotiations with trade unions on the company's plans to cut 2,026 jobs.

The cuts proposed by Aer Lingus involve the loss of roughly 30% of the company's staff and a total reduction in costs of IEP 148 million in 2002 – as well as radical changes in work practices and a pay freeze for 2002-3. According to management, there is a threat of closure within months if agreement cannot be reached.

Since announcing the planned cuts in October 2001, Aer Lingus has moved from offering minimum statutory redundancy payments only, to an enhanced package of four weeks' basic pay per year of service, which would cost it IEP 40 million.

While this would be significantly below the severance terms on offer during the most recent major restructuring in 1993, the financial difficulties are more serious on this occasion. It is understood that the two major unions involved, theService Industrial Professional Technical Union (SIPTU) and the Irish Municipal Public and Civil Trade Union (IMPACT), are likely to focus their efforts on achieving some form of early retirement option, rather than improving the 'weeks per year of service' formula.

The company had originally suggested that certain activities, such as catering and baggage handling, would be placed in separate subsidiaries. This has now been withdrawn for the immediate future.

On the equally thorny issue of privatisation, the two main unions have taken differing official stances. IMPACT, representing most pilots and cabin crew, is 'positively neutral', with a willingness to negotiate the terms of a partial sell-off if an employee ownership stake could be achieved. SIPTU, representing most other staff, is against privatisation but could take a pragmatic view if a partial sell-off was the only option to save the airline.

Indeed, a partial sell-off may now be the only option for outside finance to keep the airline going, since the European Union rules on state aid have ruled out new investment in the airline by the Irish government. A IEP 170 million injection in 1993 was at the time supposed to be the last capital investment provided to the airline.