Irish airline Aer Lingus toned down its opposition to a deal with arch-rival Ryanair, saying on Thursday a tripling of losses, rapid cash burn and difficulties in raising funds threatened its independence.
The former state airline has twice rejected bids from Europe's biggest low-cost carrier but Sean Coyle, Aer Lingus' chief financial officer, a former Ryanair executive, said he had no idea if Aer Lingus would resist a third approach.
Ryanair will always come back with a bid, Ryanair from the point of view of having a (near) 30 percent shareholding will continue to pursue the company, Coyle told reporters.
A Ryanair spokesman had no immediate comment.
A new chief executive, Christoph Mueller, takes over at Aer Lingus next week after the previous incumbent resigned in April saying the airline needed fresh ideas.
Shares in the carrier rose over 3 percent on the prospect of a major cost cutting programme, which it said would help it remain independent for the moment.
If they can get significant restructuring through that will be perceived as a positive, one Dublin-based trader said.
Aer Lingus said its bankers were refusing to lend for fresh aircraft deliveries because of the way it is using up cash.
No bank is prepared to lend money to an airline that is burning through 400 million euros ($569.4 million) of net cash in a 12 month period as we have done, Coyle said.
Aer Lingus' net cash position declined by 33 percent since the end of 2008 and by almost half in 12 months to 439.6 million euros in late June. Aer Lingus stock traded at 0.543 euros at 0800 GMT, valuing the airline at around 271 million euros, a fraction of the 750 million Ryanair offered for the group in December and the 1.5 billion euros it tabled in 2006.
Ryanair rose 2.5 percent.
Aer Lingus' loss after tax in the six months to the end of June widened 242 percent to nearly 74 million euros ($106 million) on revenue down 12 percent to 555 million.
Its operating loss quadrupled to 93 million euros -- a total which a spokesman for the airline said analysts expected to reach between 100 million and 150 million euros by the end of 2009, though there was no guidance from the company itself.
If that's the level of the loss then we can see what we need to save in terms of cost savings, the spokesman said.
A source close to the company told Reuters on Tuesday Aer Lingus was preparing a cost-cutting plan of up to 130 million euros for this autumn in order to protect its cash pile and become more efficient amid the industry downturn.
The former flag carrier, facing strong downward pressure on fares and highly consumer demand going forward, has struggled to compete against Ryanair, an aggressive foe which is using the downturn to snatch market share across Europe.
Ryanair last month trimmed its own full-year profit forecast as it was forced to cut fares to fill aircraft.
(Additional reporting Carmel Crimmins; Editing by John Stonestreet and David Holmes)