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.

A total of 94 jobs will be axed at Dublin, Cork and Shannon airports and an extra 60 workers will be made redundant at Shannon Airport in a deal their union has described as “painful”.

Another 200 ground handling staff have already opted to leave the airline through a separate deal with SIPTU, bringing total redundancies to 354.

Cabin crew union Impact yesterday revealed that 59% of staff had voted in favour of a draft proposal brokered with management to cut the loss-making airline’s costs by €15m.

They backed a plan that will mean a slimmed-down Shannon base for cabin crew will be retained while staff recruited in Ireland will continue to man transatlantic flights.

Management had planned to hire US-based crew on flights to New York, Boston and San Francisco and close cabin crew bases in Shannon and Heathrow.

It also planned to outsource 1,300 ground handling jobs.

The airline later accepted alternative plans put forward by Impact and SIPTU following

lengthy talks at the Labour Relations Commission to prevent it forging ahead with its plans.

Last Friday the airline confirmed that the SIPTU plan to avoid outsourcing would take €25m off costs and it is likely to rubberstamp the Impact plan to make €15m savings within days.

The unions’ cost-cutting measures must make savings of €40m from a total of €50m in staff savings, the remainder coming from new contracts and a pay freeze.

The staff savings are part of an overall strategy to reduce the airline’s costs by €74m by downsizing operations.

The airline suffered €22m losses this year and predicts further losses next year. Aer Lingus chief executive Dermot Mannion said last night: “This decision by Impact is a milestone development for the airline and will enable us to deliver on our stated objectives of securing annual staff cost savings of €50m.

“The outcome of the vote today, combined with a significant reduction in the cost of fuel, underpins our ability to deliver growth for the future and secures our long haul service into and out of the Shannon region, and allows us to look at opportunities for short haul growth from Shannon airport.”

Impact last night admitted workers’ support for its plan was by no means “overwhelming” with the margin of 59% voting in favour of deal out of its 1,500 cabin crew members.

The SIPTU deal was far more popular with staff, with almost 80% giving it their backing.

But Impact insisted it had “significantly reduced” the 420 job losses that management had proposed.

The new deal also means staff have accepted new productivity measures, deferred pay increases under the national pay deal until July 2010 and new pay scales for recruits after five years.

The airline suffered €22m losses this year and predicts further losses next year.

The Impact union released results of the ballot last night indicating 59 per cent had voted in favour, with 41 per cent having voted against.

The result comes days after the State’s largest trade union, Siptu voted in favour of the proposals last Friday.

Impact had recommended the deal to its members on the basis that it would save the airline’s Shannon base and retain Irish cabin crew on transatlantic routes.

The union also said the deal would “substantially reduce the number of proposed job cuts among cabin crew”.

The cost to members would be increased productivity demands in light of the loss of 94 staff through voluntary redundancy, the deferral of pay increases under the Towards 2016 pay deal until July 2010, the deferral of pay increments for two years and new pay scales for new entrants.

Mandate has 1,500 cabin crew members at the airline.

The agreement, which was worked out between unions and Aer Lingus management in meetings last month, focused on a “leave and return” scheme under which employees would receive a severance package and then be able to subsequently reapply for positions at the company on inferior terms and conditions.

Staff were also offered the option of leaving the company permanently under an early retirement or voluntary redundancy programme.

Aer Lingus is seeking savings of about €50 million on its payroll costs as part of its new reform programme. It had originally planned to cut 420 cabin crew and replace almost all Irish-based long-haul crew with US-based staff.

The agreement will also secure the future of the company’s cabin crew base at Shannon airport – although with fewer staff.

This had been earmarked for closure as part of the airline’s proposed €74 million cost-containment programme announced last month.

Impact said the new agreement would also substantially reduce the number of proposed job cuts among cabin crew.

However, the deal would involve the introduction of new productivity measures, deferred pay increases and the loss of some posts.

The new deal was reached following negotiations between Aer Lingus and Impact on possible alternatives to the cost-saving proposals put forward by management.

The agreement will be put to ballot over the next fortnight.

Under the new deal, Irish-based staff will continue to operate the Aer Lingus transatlantic routes, while a slimmed-down Shannon base will remain open.

However, pay increases under the new national agreement will be deferred until July 2010, while the payment of increments will be delayed for two years.

Under the agreement new wage scales will also be implemented for any new entrants to the airline.

The company had originally planned to cut 420 cabin crew posts and replace almost all Irish-based long-haul crew with US-based staff.

Under this deal, job losses are reduced to 94 – in addition to a separate reduction of 60 which is due to schedule changes out of Shannon.

Impact official Christina Carney said the package, negotiated with the assistance of the Labour Relations Commission, would be painful for cabin crew.

“This is a tough package for our members to accept, but we are recommending it because it achieves our main aim of minimising job losses and keeping work in the west of Ireland.

”If the deal is accepted, we will certainly expect management to remember these sacrifices when the aviation industry picks up, as it will,” said the Impact official.

The proposals were unanimously backed by Impact’s cabin crew branch committee.

The trade union Siptu is currently carrying out a ballot of its members on an agreement which it reached with the airline last week which averted a threatened strike.

The company wants Siptu to confirm by next Wednesday whether the proposed deal reached is acceptable to its members.