Aer Lingus chief is facing a loss 'if oil stays in mid-$120s'

Speaking after his airline's AGM, Mr Mannion's comments came as oil tipped new highs of $137 in New York, bringing the prospect of heavy 2008 losses into sharp focus.

Such losses would represent a stark change in fortunes for an airline that returned operating profits of €88.5m last year.

But an upbeat Mannion stressed Aer Lingus was "much better positioned to weather the storm than any other airline", insisting the company would emerge from the crisis "stronger than ever".

Asked if that comparison included competitor Ryanair, which says it can break even at €130 a barrel, Mr Mannion replied: "We're in good shape on fuel hedging and Ryanair will have to answer to where they are on that."

Aer Lingus has hedged 28pc of its jet fuel at $850 a tonne, about 32pc below market levels, until the end of 2008.

Meanwhile, Ryanair is now almost completely unhedged, but claims a considerably lower cost base than Aer Lingus, coupled with newer, more fuel efficient aircraft.

Casualties

Asked about Aer Lingus's prospects should oil hit the $200 mark, Mr Mannion said he agreed with chairman John Sharman, who told the airline's AGM about an impending "sea change" in that event.

"There is no doubt in these days of very high fuel prices there are going to be casualties across the industry," Mr Mannion added. "Aer Lingus is in a very strong position.

"We will not be a casualty."

More than two years ago, Aer Lingus set down a list of work practice changes for staff, known as the Programme for Continuous Improvement 2007 (PCI 2007).

Promising €20m in savings each year, those changes have finally been introduced after lengthy and expensive industrial relations warfare.

Asked if soaring oil prices would necessitate further staff changes, Mr Mannion said Aer Lingus would have to "respond" to the evolving environment "in new and innovative ways" as would every airline in the world.

"If the staff continue to co-operate with us the way they have in recent times, we will come out of it a much stronger airline," he added.

Yesterday's lively AGM saw the near-unanimous re-election of board members Danuta Gray and Thomas Moran.

Shareholder Ryanair, however, blocked a special resolution that would have given Aer Lingus' board more freedom to trade in its own stock in a move that could theoretically have diluted Ryanair's 29.2pc stake.

Ryanair, which is continuing to appeal the European Commission's ban on its hostile takeover of Aer Lingus, blocked a similar motion last year.