Committee Reports::Report No. 14 - Aer Lingus, Teoranta and Aerlínte Éireann, Teoranta::16 December, 1980::Appendix


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Committee Reports > List of Committees > Joint > 1980 > Committee on Commercial State-Sponsored Bodies > Report No. 14 - Aer Lingus, Teoranta and Aerlínte Éireann, Teoranta

APPENDIX 6

Aer Lingus

A message to all staff from the Chief Operating Officer

I believe that most people in Aer Lingus know that we are in very serious difficulty, especially those in the front-line areas who have seen how our traffic has declined. Like any business, we have had difficulties in the past and they have been overcome. But the size and depth of our present problems are far in excess of any that we have seen before. The Chief Executive has described it as “the worst outlook in the history of Aer Lingus” and every fact and figure that comes to hand endorses that view.

The reason I am writing to you is not to start people worrying about what may befall us. What I want to tell you is WHY things are so bad and WHAT we have to do about them. We have a track record of being able to fight our way out of this kind of difficulty. I have great confidence that we can do so in this case, but it is essential that we all understand the problem and cooperate in administering the remedy.

WHAT IS CAUSING OUR PROBLEMS?

There are four main elements:—

• World Economic Depression — this has caused air traffic worldwide to decline dramatically and we are no exception.

• The Recent Strike — we lost a lot of money during the strike and clearly a lot of future business was frightened off.

• Cost Inflation — of payroll, materials, services, fees and fuel. These costs are running way ahead of anything we can get in return by way of fare increases.

• Cut-throat Competition — particularly on the North Atlantic, from airlines who are prepared and seem able to sustain losses just to corner some of the market.

WHAT CAN WE DO?

We have a programme of action to deal with the situation which falls under three main headings:—

• Immediate Cutbacks: We have had to terminate services to Chicago and close down the station with the loss of 30 jobs. We are looking very closely at the Boston situation which I have to tell you, is very much at risk. On the European side, we have reduced our 737 fleet by one this summer and we have made major cutbacks in our current and capital expenditure. This year’s staff budgets have been cut by 200 man-years.

• Overhaul of our Cost Structure: The immediate cutbacks are designed to trim our staffing and overheads to the level of business that is currently on offer. But that is not enough. We need to make further cuts in our costs because our products are costing more to produce than what we can sell them for.

• Maximise Revenue: There is little scope for earning extra revenue from air transport. However, there are possibilities for non-airline revenue. We must clear away any barriers in this area which will not only help to improve our finances, but will actually allow us to create some badly needed employment.

HOW DO WE GET RESULTS?

Every single aspect of our operation and organisation is being scrutinised in the search for improvement. Departmental budgets have been cut and our spending under every heading is under review. The biggest single item of expenditure we have is payroll. Inevitably we will have to pay a lot of attention to this area. There are four specific items which departmental managers have been asked to examine:

• Overtime — we must only have it when it is unavoidable. Automatically replacing people who are missing, regardless of whether there is work to warrant it, is simply not on.

• Rosters — they will have to be looked at again to make sure that they are geared to the work requirements. It may involve looking at new ways of rostering people and allocating work so that the manpower is used effectively.

• Flexibility among work groups — this entails getting people to do work which is appropriate to their grading/ category even where this may cross organisational boundaries. This may involve structural or organisational change. We must not allow demarcation to reduce our efficiency.

• The Supervisory/Management Structure — as well as improving efficiency at the ground floor level we will have to thin out the superstructure. This can be done by looking at every vacancy that arises and deciding whether the job really needs to be filled or whether we can avoid it by some sensible realignment of functions.

The achievement of savings under all these headings will make a contribution towards the overall recovery programme. Departmental managers will be taking the initiative in consultation with senior supervisors, staff and staff representatives, to see what scope there is within the department to make a contribution. Clearly each department’s capacity to make savings under the different headings will vary.

WHERE DO THE TRADE UNIONS COME IN?

Last week I met all of the trade unions, officials and shop stewards to explain the problem, to outline our plan of action and seek their active cooperation. I told the trade unions that in my opinion the people of Aer Lingus knew there was a problem and expected something to be done about it.

Personnel will be seeking to conclude with the trade unions the productivity agreements which have been on the table for some time. They include proposals for vital modernisation and computerisation plans as well as removal of constraints on new opportunities to increase our businesses. It is most important that progress is made quickly in this area.

Although the main thrust of the effort to cut out payroll waste will be at departmental level, it may be necessary to seek to revise some work practices which are enshrined in joint agreements and in these cases the matters will be taken up with the trade unions.

We will be keeping the trade unions generally informed about progress so that we reduce conflict based on misunderstanding or lack of information to a minimum and move smoothly towards becoming a more efficient airline.

CAN WE DO IT?

Much of our difficulty is caused by external forces which are wreaking havoc in the air transport industry. Not only are markets declining, but airlines are engaging in savage and suicidal fare competition, which the Sunday Times recently described as a “bloodbath”. To help you have a better grasp of the international situation, I am including overleaf a list of measures other airlines have been forced to take. The measures that we are planning to take are less severe than most and it must be the fervent hope of all that we can keep it that way.

The purpose of this letter is to make a special plea to you to cooperate in the staff-related recovery measures which I have described. The Chief Executive has asked me to coordinate this programme on a company-wide basis. I am asking you to accept whatever changes may arise from tighter manpower controls and to accept that I will endeavour to make cuts in as even-handed a way as possible. I am asking you to fight the competition as hard as you can in whatever way is open to you, by doing your own job as efficiently as you can, by cutting out waste, by out-performing the competition in service to the customer, by helping to get business for Aer Lingus and not being afraid to state the Aer Lingus case to your friends and acquaintances.

It is a time when we must all recognise realities. We have a fight on our hands and it is going to take a great deal of work and cooperation to protect Aer Lingus. There is a great deal at stake.

Yours sincerely,