Aer Lingus could link up with American Airlines

Aer Lingus could strengthen links with American Airlines as the pair move towards an agreement on co-operating on scheduling and pricing, according to Willie Walsh, chief executive of the Irish carrier's owner.

Operating profits at Aer Lingus’s owner International Consolidated Airlines’ Group (IAG) fell 4 per cent in the three months ended September 30th to €1.2 billion as sterling weakened in the wake of the UK’s Brexit vote.

Speaking after the group published the figures on Friday, Mr Walsh indicated that the Irish carrier could enter a joint venture with American Airlines along the lines of that operated by its parent.

“In terms of a joint business, there are a couple of steps,” he said. “In the first situation they will do more code-sharing with American and you will see more co-operation between American and Aer Lingus.”

IAG, which also owns British Airways, Iberia and Vueling, operates a revenue-share deal with American on the North Atlantic. These agreements allow airlines to carry each others' passengers on certain routes, which saves them money while offering customers increased choice.

Mr Walsh confirmed that Aer Lingus is on track to re-enter the One World Alliance, a broader agreement between carriers that it left while still an independent airline.

He also repeated that the airline is likely to begin flying a new transatlantic route next summer. Aer Lingus is expected to add to its existing US destinations, including three launched this year: Hartford, Connecticut; Newark New Jersey and Los Angeles.

Quarterly figures

The Irish airline is vying with Iberia to be IAG’s second most profitable company after British Airways, Mr Walsh said. The Irish airline is already the best performer in terms of operating margin and return on invested capital.

The group does not break out quarterly figures for its constituent airlines, but it is understood that Aer Lingus beat the €45 million surplus it earned during last year’s third quarter.

It also had the highest operating margin of IAG’s airlines at 29.7 per cent, aided by the fact that it booked a large portion of its revenue in dollars, which strengthened against the euro, the currency in which the group reports, and a strong performance in what is normally its best quarter.

IAG’s operating profits rose 6.1 per cent in the first nine months of the year, but showed a decline in the third quarter as a result of industrial action and sterling’s slump.

The group cut its earnings outlook further as a result. It expects full-year operating profit to be about €2.5 billion,with “no significant change in its short-term trading”.

Third quarter revenues fell 4 per cent to €6.4 billion, with passenger revenues down 5.4 per cent to €5.8 billion.

“While strong, these results were affected by a tough operating environment with a very significant negative currency impact of €162 million, primarily due to sterling weakness, and continued disruption due to air-traffic control strikes,” said Mr Walsh.

IAG reported operating profits of €1.9 billion for the first nine months, as against €1.8 billion a year earlier.

Pre-tax profits, before exceptional items, increased 14.5 per cent to €1.7 billion, versus €1.56 billion a year earlier.

“The UK referendum vote to exit the EU resulted in economic uncertainty throughout the second and third quarters of 2016.”