Aer Lingus Survival
Package Agreed by EU

By Irish America Staff
December / January 2002

Ireland’s national airline, Aer Lingus, has been pulled back from the brink of bankruptcy by a deal hammered out between the Irish government and the European Union transport authorities at the eleventh hour. Aer Lingus suffered massive losses in the aftermath of the Twin Towers collapse, and was no longer considered to be commercially viable.

The semi-state body, partly owned by the Irish government, had been the recipient of a number of cash injections in the past to keep it afloat. But such a move was banned by the EU under its rules of competition. It has rejected the possibility of any government giving aid to its national airline, saying the European market was badly in need of restructuring before September 11 and member states should not try to prevent this from happening.

“No direct cash, no aid, no state subsidies,” said EU Transport Minister Loyola de Palacio. However, when it emerged that the Belgian national airline, Sabena, had received money from the Belgian government when it declared insolvency, the Irish government put the pressure on.

Aer Lingus will now receive money on the basis that the government can guarantee it will improve the company’s commercial viability afterwards. If the government can show it is acting like a rational investor, the state aid will not be deemed illegal, it seems. “We will say no to state aid and subsidies but we don’t say no to public investment,” said Ms. de Palacio.

“If there are options of returning Aer Lingus to profitability and at the same time avoiding a direct state aid, then there is a possibility,” another EU official told newspapers.

Taoiseach Bertie Ahem warned workers at the airline that a complete restructuring is on the cards, and it seems that thousands of jobs could be shed. “Aer Lingus at all levels has to work to get an agreement on that plan and when that happens, we can see where the resolution will be.”

It is believed that as many as 40 per cent of the workforce will be asked to accept redundancy, and the first notices have already been sent out to 600 part-time workers. Aer Lingus is losing two million per day, and would survive only weeks without help. A number of its transatlantic routes have already been slashed, including Ireland/Newark and Ireland/ Baltimore/Washington. A number of other routes have been scaled back. ♦

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