Aer Lingus, Ireland's state airline, has seen last year's profits turn into heavy losses.

We are not satisfied with mere survival

Willie Walsh chief executive

The airline lost 140m euros (�62m; $138m) during 2001 compared with profits of 71.6m euros in 2000.

The company blamed its financial troubles on the foot-and-mouth crisis and the post-11 September slump in the number of American tourists visiting Ireland.

But it has also suffered from board room upheavals and repeated industrial action from pilots.

Ryanair threat

The airline, which has only survived by the skin of its teeth, has already cut one-third of its workforce and launched a major cost cutting exercise.

Much more remains to be done to return to adequate levels of profitability

Tom Mulcahy chairman

Whilst the radical moves have helped stave off insolvency the battle is far from won, with falling fares and increased competition from low cost rivals such as Ryanair.

"We are not satisfied with mere survival," said group chief executive Willie Walsh in a statement.

"The survival plan was the beginning, not the end, of change at Aer Lingus."

The perils of efficiency

"We are becoming more efficient, simplifying the business of getting people to their destinations," he said.

But that very efficiency drive - which include new working rotas for pilots - is also the cause of the strikes that have deterred passengers and cost the airline millions of pounds a day.

Passenger numbers fell 4.6% to 6.6 million during the year.

"Much more remains to be done to return the company to adequate levels of profitability," warned chairman Tom Mulcahy.