* Plan to reduce operating costs by 97 million euros by 2011
* Job cuts to affect about 17 percent of its approx 4,000 staff
* Pay cuts for those earning over 35,000 euros
* Needs to address rapid cash burn
* Shares up 7.7 percent
(Adds analyst comment, details)
By Padraic Halpin
DUBLIN, Oct 7 (Reuters) - Ireland's Aer Lingus announced 676 job cuts and cut salaries on Wednesday, boosting its shares by almost 8 percent as it drives reforms needed to compete with thriftier airlines.
Aer Lingus, which has fended off two hostile bids from Irish
rival Ryanair Its shares jumped 16 percent in early trading and were up
7.7 percent at 0.77 euros by 0840 GMT, making it the top gainer
in an Irish market up 0.9 percent. The airline, which has been rapidly burning through its cash
reserves, said 489 operational and support staff will be offered
voluntary redundancy but it may seek more cuts if cost savings
of 74 million euros are not achieved by 2011. It will also reduce pay for staff whose basic pay is above
35,000 euros and said it wanted non-staff savings of 23 million
euros in 2010, with a second stage of cost savings to later
result in 187 redundancies. Aer Lingus's shareholder structure has been a stumbling
block to reform in the past and could hamper the implementation
of the plan, which the airline wants to complete by Nov. 18. "It's what's needed ... but the key is implementation. If
implemented, it should go some way to reducing and removing the
cash burn in the company," said Stephen Furlong, an analyst at
Davy Stockbrokers. Ryanair has a nearly 30 percent stake in Aer Lingus while
the government and Aer Lingus staff, past and present, own 25
percent and 14 percent respectively. Unions are also represented
on the Aer Lingus board. The IMPACT trade union which represents hundreds of Aer
Lingus cabin crew and pilots said the proposals were as severe
as expected and that it would consider its response. OUTLOOK POOR Aer Lingus Chief Executive Christoph Mueller said in a
statement: "The outlook in each of our current core markets is
poor and, in line with the macroeconomic outlook, we do not
expect any near-term recovery. "Against this backdrop, Aer Lingus cannot continue with an
operating cost base which is structurally uncompetitive." Mueller and other senior management are taking a 10 percent
cut in salaries, which will be frozen until the end of 2011. Aer Lingus passenger numbers rose 4.1 percent year on year
in September but that included a 20.4 percent fall in passengers
on long flights, it said. The restructuring plan will hit both long and short flights,
but the bulk will fall on the long haul network, Chief Financial
Officer Sean Coyle added. Larger European rival Air France-KLM posted a 3.7 percent
drop in September traffic and reported continued pressure on its
unit revenues, though it managed to boost the proportion of
seats sold on its flights. On Tuesday, British Airways said it would cut the equivalent
of 1,700 staff in Britain, drawing a strike warning from unions.
(Editing by Andras Gergely and Jason Neely)
($1 = 0.6802 euro)