I thank the committee for the opportunity to make a presentation. I propose to run through an introduction to the Irish Airline Pilots Association. It was established in 1946 and we are also a member of the International Federation of Airline Pilots Associations. Through it we have a seat on the International Civil Aviation Organisation, one of the two non-governmental seats in the United Nations body, where we have an input into aircraft design, air law and so on across all nation states which are signatories to the UN-ICAO axis.
We have 1,200 members, the overwhelming majority of whom are Aer Lingus and Ryanair pilots. Our objectives, as stated on our website, www.ialps.net, are to provide a body of expertise, to advise on matters relating to air transport, improving legislation in the industry, particularly that which affects professional pilots, maintenance of professional standards, the provision of information and opportunities to our members and the defence of an adequate lifestyle.
On Aer Lingus restructuring, we concede there is a fundamental problem with Aer Lingus and we also want to be part of the solution. However, a number of facts are not in the public domain and need to be aired, which is why we sought this hearing. We sent the committee a document which outlines our misgivings about the green field plan which has no strategic future. As pilots and shareholders, that is, major stakeholders, it does not give us a vision as to what the future should hold. It is the same mantra we heard before, with the exception of a new outsourcing provision to the United States and the United Kingdom.
The outsourcing has already commenced. Approximately 32 non-Aer Lingus pilots are currently flying Aer Lingus aircraft on routes which were heretofore flown by Aer Lingus pilots. I refer members of the committee to page 3 in the pink document. The indexation is quite simple and is in the top right-hand corner. That is an internal memo from Astraeus Airlines. That internal memo shows how Aer Lingus engaged with Astraeus Airlines during this summer while it refused to talk to us about any of its plans to restructure the airline.
The major issues were as follows. The operating loss reported for the first half of 2009 up to June was €93 million. There is another way of looking at that €93 million to which I shall return. Another highlight was the cash burn from €803 million from June 2008 to €440 million remaining in June 2009. This is despite a 10.7% reduction in the staff costs per passenger. I again refer members to page 6 of the pink document. The other main issue I would like to discuss is the level playing field on labour costs.
I refer members to page 8 which puts into context the operating loss for the first half of 2009. It is not for the purpose of criticising anybody or to create a difficulty here, but I just want to outline some facts. If members look at the bottom line, each of those negative numbers, including the €13.62 million in January 2009 and the €14.8 million in February 2009, shows the losses to Aer Lingus because their fuel hedging cost money above the spot price of fuel. All these data are readily available through the IATA websites. It is publicly available information. For some reason it is not generally seen in the media. The total cost on Aer Lingus for fuel hedging for six months was €92.4 million. It should be noted that the total operating loss for the six months was €93 million.
The next major highlight was the net cash burn which went from €803 million to €440 million. I bring attention to two items in that. First, uniquely in the industry Aer Lingus spent €184 million on two brand new aircraft and it bought those aircraft for cash. There was no aircraft leasing or loans. It was a cash deal on the balance sheet. We are not aware of any other airline that conducted a similar transaction. Most airlines engage in leasing. After the results for the first half of 2009, some 75% of one of those aircraft was leased so that cash went back on the balance sheet. There was also a once-off severance programme of €97 million. Suffice it to say that pilots have been excluded from every severance programme since 2002 and so we got no part of that €97 million.
On the level playing field, I draw members' attention to a letter from me addressed to the Minister for Finance, Deputy Brian Lenihan, which is contained on page 9. In that letter we raised our concerns that contrary to the criteria for determining the status of workers contained in the official guidelines the practice of treating pilots as being self-employed continues. As many of our members are doing this, we are aware of pilots who are employed, essentially offshore, on individual contracts. They form companies either as groups or singularly. They are then essentially retained or contracted through an agency to provide labour to other airlines. The practice does not happen in Aer Lingus. However, that has the effect of avoiding a great deal of tax and social charges in the Irish economy. I refer members to another document that should be circulated to them. It is dated Tuesday, 28 September 2009 and is a translation — the original is on the back — of a letter from Spanish transport unions to their Ministers for finance and labour. Essentially it draws attention to the same activity whereby pilots and cabin crew are excluded from tax and social charges in Spain at a great cost advantage to the airline concerned.
On the commitment of our 530 member pilots in Aer Lingus, through an investment vehicle called Tailwind, we gathered together almost €30 million from our members through loans and various savings. This was part of a defence strategy to block the Ryanair takeover bid in 2006 and later again in 2008. Our personal losses are in the region of 80%. That was the level of commitment we showed to an independent Aer Lingus and maintaining policy of a minimum of two airlines for air access to Ireland. Clearly other groups in the airline did not participate in what we did and the PowerPoint slide contains a reference to golden parachutes.
A further demonstration of our commitment to the airline was a 4% to 8% pay cut in 2008. The last offer we made before the current discussions commenced is addressed in page 17, which shows a letter from me to the chairman of Aer Lingus dated 3 July. Members will see in the second half of that page that we offered to work for four weeks without pay, subject to a number of caveats. Central to that was that the executive and senior management would do the same and that the Shannon to John F. Kennedy International Airport route would remain open for at least 12 months from October 2009. That is a further demonstration of the commitment of our members to the future of the airline.
As I understand it we are now in the "greenfield" process of talking under the auspices of the national implementation body and the Labour Relations Commission. As pilots, we have indicated quite strongly to the company that we will yet again invest in the future of this airline. We have one main caveat on all these discussions and that is that the outsourcing be terminated and that there be no more outsourcing either in the UK or in the US. Members should be familiar with what we call the "Aer Lingus snake", which is essentially a threat to the existing Aer Lingus workers that aircraft will be registered offshore and join the UK register for the purposes of making us in Ireland redundant.
I shall summarise the key points. We are a key employee group and are also shareholders in this organisation. We have demonstrated our commitment to its independence through Tailwind, pay cuts and our offer to work for free for a month this year alone. We need guarantees that the outsourcing will be terminated and we will also need guarantees that the joint venture in the US shall not be crewed from the US.
