Aer Lingus has hinted that a further round of cost-cutting may be necessary in light of external economic pressures.

Unveiling a widening of the Irish flag carrier's losses for the first quarter of 2011, chief executive Christoph Mueller said the company had had a challenging start to the year. This included a dispute by cabin crew and "difficult demand conditions, particularly on leisure routes from Ireland".

The Irish economy has been badly battered by a banking crisis and consequent austerity measures, resulting in a fall in discretionary travel.

Despite growth among higher-yield business passengers on traditional business routes to the UK, the airline warned that it "may be forced to further reduce capacity on under-performing routes if demand softness continues".

While the carrier still anticipates an operating profit before exceptional items for 2011 as a whole, this will likely be at "a significantly lower level" than in 2010.

"In light of the continuing weakness of the Irish economy and pressures on non-controllable costs, we are assessing whether the Greenfield cost reduction programme is sufficient to protect profitability for the future or whether further measures are required," said Mueller.

The Greenfield programme included measures to increase the working hours of cabin crew. A dispute over rostering aspects of the plan led to industrial action by cabin crews at the start of 2011 and contributed to a first quarter operating loss before exceptional items of €53.7 million ($79.8 million). This was significantly worse than the €37.9 million loss for the same period last year.

Revenue for the first quarter was also down, by 4.8% to €217.9 million. This was despite an 11% reduction in capacity, split almost equally between deliberate decisions to reduce services and the cabin crew dispute, which led to cancelled flights.

More positively, said the airline, yield per passenger grew by 9% in the quarter compared to the same period last year. This continued a trend that began in 2010, and the airline said that early yield indications for the next two quarters also appear positive.

Source: Air Transport Intelligence news