Aer Lingus warns fuel, slowdown threaten viability

By Andras Gergely

DUBLIN (Reuters) - Irish airline Aer Lingus (AERL.I)(AERL.L) expects to make losses this year and next due to high fuel costs and a slowdown in consumer spending, which it said could threaten the long-term viability of its business.

High oil prices and a global economic downturn have pressured airlines from large full-service carriers to budget operators, in what many people in the industry say is a crisis that could overshadow the fallout from the September 2001 attacks on the United States.

Aer Lingus, Ireland's former state airline, on Thursday posted a first-half operating loss of 22.3 million euros (18 million pounds) compared with a 2.6 million euro profit a year ago and announced plans to cut capacity.

The company said it expects a loss between 22 million and 30 million euros for the full year, which could widen to a "3-figure" million loss in 2009.

Aer Lingus said it will give details of new cost-cutting measures by the end of September.

Aer Lingus' costs per seat are up to twice that of rival Ryanair (RYA.I), Europe's biggest budget carrier, which owns more than 29 percent of Aer Lingus after a failed takeover bid.

"It is now clear that we will require further fundamental changes in our operating cost base in order to minimise losses in 2009 and to help ensure the long-term viability of the business," Chief Executive Dermot Mannion said.

Aer Lingus said it would cut capacity on long and short-haul flights.