Aer Lingus, the Irish airline, said today that severe cost cutting would be needed for the business to remain viable in an environment of high costs and falling demand from passengers.

The Irish carrier reported a €2.6 million operating profit in the first six months of last year had turned into a €22.3 million during the first six months of 2008.

Full-year loses are expected to reach between €22 million and €30 million but could widen to a three figures in 2009 if cost-cutting measures are not undertaken, Aer Lingus admitted today.

Like many other European and American airlines, Aer Lingus is suffering from the combination of sustained high fuel costs and a slowdown in consumer spending.

Dermot Mannion, chief executive at Aer Lingus, said: "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."

Details of the cost-cutting measures will be given by the end of September. The carrier's costs per seat are up to twice that of rival Ryanair, the budget airline, which owns more than 29 percent of Aer Lingus after a failed takeover bid.

Aer Lingus said it also planned to cut capacity on long and short-haul flights to limit loses.

Mr Mannion said: "Long haul capacity for winter 2008/09 will decline by 11 per cent year on year, compared to previous plans to grow by 1 percent, and short haul capacity in the same period will decline by 1 percent compared to a previous expectation of 2 per cent growth.”

Aer Lingus's shares traded 2.3 percent lower in early trading in Dublin at E1.39, down 60 per cent since a peak in April 2007.

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