Aer Lingus is making further job cuts as part of a €97 million ($143 million) per annum cost cutting programme announced today that will also see the Irish carrier making use of a UK AOC.

Aer Lingus will work to generate €97 million per annum in cost savings and €74 million of this will come from staff cost savings and the other €23 million from non-staff cost savings, Aer Lingus says in a statement to the London stock exchange today.

This move will help Aer Lingus conserve cash and keep its strong balance sheet, it adds.

The staff cost reductions involve "reduced head-count, banded reductions in basic pay for staff whose basic exceeds €35,000 per annum" as well as reduced variable pay and staff allowances.

It says 80% of the €74 million per annum target will be achieved in 2010 and the full amount will be achieved by the end of 2011.

The airline says it has to do this so it can compete against lower-cost competitors.

Aer Lingus may have cut costs in the past but "an objective analysis shows that operating costs and in particular staff costs do not reflect current and expected trading conditions and are significantly out of line with peers", says Aer Lingus.

The carrier says it has already told 100 staff to leave by year-end and that the cuts it is about to make will create a further 489 surplus positions.

"While it is hoped that many of these redundancies [in operational and support areas] will be achieved on a voluntary basis", the company reserves the right to make the cuts compulsory, it says.

Aer Lingus chairman Colm Barrington says the airline's top management are also affected.

He says executive and management teams have agreed to a 10% reduction in salaries which will be frozen at least through to the end of 2011.

And non-executive directors have agreed to a further 10% reduction in fees on top of the 20% reduction they took earlier this year.

The non-staff cost savings of €23 million in 2010 will be "derived from areas such as airport charges, distribution, reduced direct operating costs, maintenance and overheads."

The airline also says it is speaking to the trustees of the Irish Airline Pilots Superannuation Scheme and Irish Airlines General Employees Superannuation Scheme. Aer Lingus contributes to these schemes but wants to change the contribution scheme.

These cuts are part of the first phase of the programme while the second phase "will focus on initiatives to deliver revenue growth, improved customer service and further cost savings through a series of business improvements" that include a new IT system, it says.

As part of the second phase, the airline will be broadening its customer base beyond the Irish consumer "through the use of a AOC from the UK", it adds.

Source: Air Transport Intelligence news