Is there less turbulence ahead for Aer Lingus?
Ryanair is clinging onto its 29.8 per cent and strikes loom at Aer Arann, but the pensions row is in hand, and passenger numbers are up
When the airline published its interims, Mueller hinted that the Pensions Board’s concerns could be addressed, but it is clear that there are still some hurdles to be negotiated before the whole question is finally resolved.
Against this background, the airline’s performance is improving. Last week it said long-haul passenger numbers were up 17 per cent in July, while a total of 1.025 million people flew short haul, 1.5 per cent more than in July 2012. Its operating margins are 5 per cent to 6 per cent. The company expects profits for the year to be €49 million, broadly in line with what it made in 2012.
Holohan says this compares favourably with other European flag carriers that are struggling to be profitable. He singles out long haul as the star performer, and says Aer Lingus is meeting some headwinds in its short-haul business, specifically in the competitive market on routes between Ireland and Britain.
In it for the long haul
The airline itself is betting on long haul to deliver growth and profits. Part of this strategy involves selling its services from Dublin to the US to British travellers as a viable alternative to going via Heathrow.
The logic is that if you are flying from a regional centre such as Manchester or Edinburgh, there is little difference in time, but in Dublin you avoid the hassle of Heathrow and get visa clearance at the same time.
Aer Lingus articulated the strategy in June, but it looks set to suffer a minor setback next week. Pilots at Aer Arann, which operates Aer Lingus’s regional services, including flights from Britain to Dublin, and which has embraced the plan, are threatening to strike next week in a row over pay. Their employer responded to this by saying it would have to consider putting staff on protective notice.
While the strike is timed to start on Tuesday, talks began in earnest last night to resolve the dispute and avoid travel chaos.
If the action does go ahead, Aer Lingus will lose business and potentially see its reputation damaged, as its services are threatened with cancellation. O’Neill says the smaller partner has only been providing about 35,000 to 40,000 of its connecting passengers to date, about 4 per cent of its entire long-haul business.
While he does believe the Aer Arann service could become an important element of the larger partner’s long-haul strategy over the medium term, he does not see the strike threat as a major blow at this point. In terms of the strategy itself, he says it has a lot of potential: “There is a quite a bit of upside to come from it if they can get it right.”