Overview: Aer Lingus cut jobs
Prospects: Aer Lingus CFO is on collision course over job cuts
Taxing market conditions and a downturn in the number of consumers traveling
abroad has resulted in the proposed cutting of jobs and restructuring across the
board at
Aer
Lingus.
The news comes no less than a month after Sean Coyle took over the reigns as
finance director at the airline – leaving the same post at fellow troubled
carrier Ryanair.
At the time, John Sharman, chairman of Aer Lingus, said challenging times
bring with it unique opportunities and that’s precisely what Coyle has in store
in restoring stability to its finances.
What’s happened…
Following two years of heavy losses, including a 26% fall in share price
since its listing in 2006, Aer Lingus has announced it requires ‘fundamental
change’ in avoiding operating losses in excess of £80m in 2009.
With a 29.8% stake in the business, Ryanair has criticised Aer Lingus’ cost
reduction strategy as ‘an abject failure’ whereby its management could ‘not
deliver fundamental changes’ in the cost base.
What’s next…
Ensuring long-term profitability means Coyle has to employ short-term
strategies around streamlining production and flexibility in absorbing the
impacts.
According to Andrew Lentin, partner at Ineum Consulting, the further a
business slides down the decline curve, the harder it is to return to form.
The order in which an FD does things becomes more pertinent, and they need to
generate sufficient cash sourcing options, said Lentin.
He added: ‘Where are you going to generate our cash from? Look at the quick
wins – what will generate cash quickly at minimal cost?’
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It’s the quick-wins which keep a business sustainable and generate cash in
undertaking any necessary restructuring, he adds.
The business also needs to be viewing differently internally.
There needs to be a team of resources running day-to-day operations and
another getting to grips with the problem and disseminating information to
shareholders.
Conditions aren’t expected to ease for Coyle, with the International Air
Transport Association significantly revising down its forecast for airline
traffic.
Coyle’s predicament follows recent reports of Alitalia’s administration and
Zoom Airline ceasing operations entirely. Rising fuel costs and a series of
mid-air flight dramas also continue to plague the reputation of the airline
industry.
Aer Lingus is expected to outline details of its cut-backs by the end of
September.