* Airline may cut capacity again on underperforming routes
* Higher fuel costs to eat into yield improvements in 2011
* April passenger numbers up 19 percent
* Shares down 0.9 percent
(Adds analyst comment, more detail, shares)
By Carmel Crimmins
DUBLIN, May 5 (Reuters) - Irish airline Aer Lingus may ramp up a controversial cost-cutting programme after confirming profit this year will be significantly below 2010 due to weak demand and higher fuel prices.
Facing constant pressure from Ryanair, its bigger and leaner rival, Aer Lingus has cut routes, staff and pay to survive and another round of cuts could put it on a fresh collision course with employees.
"While we still expect that Aer Lingus will be profitable in 2011, we expect that the level of profitability will be much lower than in 2010," Chief Executive Christoph Mueller said on Thursday.
"In light of the continued weakness of the Irish economy and pressures on non-controllable costs, we are assessing whether the... cost reduction programme is sufficient to protect profitability or whether further measures are required."
Industrial action by cabin crew over longer working hours hammered its first quarter performance with its operating loss before exceptional items up 42 percent to 53.7 million euros.
Aer Lingus has squeezed savings of an annual value of 72 million euros by the end of March but its reliance on the Irish market, still struggling to emerge from one of the industrialised world's worst recessions, has prompted a second look at its outgoings.
"They could do with a few breaks in terms of the state of the Irish economy and where fuel is at the moment," said Joe Gill, analyst at Bloxham Stockbrokers.
"Clearly the operating environment is very tough. It looks like now for the full-year their operating profit will be somewhere in the region of 20 to 25 million euros compared to 58 million euros in 2010."
Shares in Aer Lingus were down 0.9 percent at 83 euro cents at 1004 GMT in a general market that was 0.3 percent weaker.
The company's stock has risen around 19 percent since hitting a nine-month low of 70 cents at the end of March helped by a government-sponsored report published in April which recommended that the state sell its 25 percent stake in the airline.
A government minister has said Dublin is unlikely to sell any state assets this year. A sale of its Aer Lingus shares would be complicated given that Ryanair, which has had two hostile bids for the group rebuffed, holds a near 30 percent stake.
APRIL PASSENGER NUMBERS
First quarter revenues fell by 5 percent but average yield per passenger rose by 9 percent due to a cut in poor performing routes and an increased proportion of business travellers.
Aer Lingus said early yield indications for the second and third quarter of this year were postive despite a drop in non-fare revenues per passenger but rising fuel costs will likely fully absorb further yield improvements.
The company said it expected short-haul yields to rise on a single digit basis and on a double-digit basis for long-haul routes over the peak summer period.
April passenger numbers rose 19 percent from a year ago helped by the comparison with the previous period when an exploding Icelandic volcano closed Irish and UK airspace and the occurence of the Easter holidays in April.
April's load factor -- a measure of how well a carrier is selling seats -- decreased by 4.9 points to 70.9 percent.
Aer Lingus said it expected to take delivery of a fourth, finance-leased A320 by the end of June with no further fleet additions planned for the remainder of this year. (Editing by Mike Nesbit)