Air Transport World

Ireland's other low-fare airline: Aer Lingus has rebuilt itself into a different kind of competitor under new CEO Willie Walsh. (Profile).

As large network airlines in Europe and North America try desperately to adapt to the sweeping changes that have occurred in the airline industry over the past two years, they could do worse than study the example of Aer Lingus. Last year, the chronically unprofitable airline completed a transformation as deep as it was swift and was rewarded with a net profit from continuing operations of 16.8 million [euro], reversing a loss of 149.7 million [euro] in 2001.

It is a story of how a new leader at the moment of supreme crisis grasped the situation, saw what needed to be done and was able to persuade the airline's workgroups to accept necessary but painful restructuring to keep their employer solvent. The leader was Willie Walsh, who was promoted from the COO position to chief executive in October 2001, capping a career that began in 1979 when he joined the Irish flag carrier as a cadet pilot.

Walsh took the hot seat at a time when the airline was burning through 2.5 million [euro] per day, a rate that if not slowed meant it would be out of cash by January 2002. Credit facilities and the debt financing that had been negotiated over the previous summer had been withdrawn after 9/11. To make matters worse, the Irish government's hands were tied after the European Commission made it clear it would not abide any aid to the airline, which is 90% owned by the state.

"There was no way around it. It was adapt or die," Walsh tells ATW. Moreover, he was determined to break the traditional industry cycle of profits, crisis, restructuring, relaxation. "To us it was evident that this wasn't the usual cyclical downturn in the industry ... What we witnessed during the past 20 months challenges the traditional thinking ... Clearly there are carriers out there who were profitable, who grew and who added value during the downturn and this difficult period. And you only can do this when you have the right business model."

In the month following the terrorist attacks, Walsh and a small team of executives--CFO Brian Dunne, CO0 Seamus Kearney and Group Corporate Affairs Director Dan Loughrey--assisted by external consultants formulated a Survival Plan targeting an annual cost reduction of 16%, or 190 million [euro]. …

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