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2-Aer Lingus staff face job cuts and pay cuts

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Aer Lingus (AERL.I) will cut wages and probably jobs to ensure the loss-making Irish airline survives, its chairman said on Friday.

The former state carrier is burning through its cash reserves fast and generating spiralling losses through a vicious combination of declining sales and high labour costs, a legacy of its history as a state-owned company.

“I think Aer Lingus probably has got more people then it needs,” Colm Barrington told national radio.

He declined to comment on a newspaper report that Aer Lingus would seek about 500 redundancies from its 3,879-strong workforce in a 130 million euro ($187 million) savings plan.

But Barrington, who has overseen the company’s day-to-day operations after former Chief Executive Dermot Mannion left in April saying the airline needed fresh ideas, said employees should be prepared for tough measures.

“I am trying to get all Aer Lingus staff to work at market conditions and at market rates because if we don’t work at market conditions and market rates we don’t survive,” he said. “We will be looking for pay cuts certainly.”

Aer Lingus’s shareholder structure has been a stumbling block to major reform. Its arch-rival Ryanair (RYA.I) has a near 30 percent stake while the government and Aer Lingus staff, past and present, own 25 percent and 14 percent respectively.

Barrington said new Chief Executive Christoph Mueller would present an overhaul of its business model later this year.

Shares in the group were up 3.4 percent in afternoon trade, gaining on the prospects of a successful restructuring.

The group posted a record first-half operating loss on Thursday and said no bank was willing to lend it money for fresh aircraft deliveries because of its cash burn rate. [ID:nLQ27317]

Barrington said Ryanair, which has twice tried to take over the company, had been a thorn in Aer Lingus’ side.

“I think Ryanair has done a lot to damage Aer Lingus and it has damaged the share level of Aer Lingus.”

On Thursday, Aer Lingus’s chief financial officer toned down outright opposition to a potential third takeover offer from Ryanair, admitting that the company’s difficulties threatened its independence.

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