Aer Lingus reverses cargo strategy

Airline to expand its cargo sector over a year after exiting most of the business

Emmet Oliver

Aer Lingus is re-enter the cargo market more than a year after exiting most of the business because of the significant logistics and costs involved.

The airline's managing director Dermot Mannion has indicated the airline is hoping to expand its cargo offering substantially. It is understood a new direct service to Amsterdam will start in the new year. The airline is also working on plans to move cargo to Dubai, its first long-haul route outside the US.

Mr Mannion has pointed to the importance of cargo to his previous employer, Dubai-based carrier Emirates.

In recent days he has signalled that Aer Lingus hopes to identify certain opportunities in the cargo business that could boost the company's profits.

However, the airline is anxious not to take on costly cargo operations that require large numbers of people. The airline's capacity to operate large-scale cargo services is also limited by the size of some of its newer aircraft.

The airline does have a cargo division at present, but it depends heavily on other airlines to transport heavy goods. Last July the airline said it would concentrate on direct cargo services into Europe and was no longer offered interlining services. This is when cargo for destinations not served by Aer Lingus is carried out of Ireland by the airline and transferred to another airline.

A spokesman for the airline said it had recently formed a new cargo sales team to increase the airline's presence in the sector. Several European destinations for new cargo operations are also being studied, he added.

Mr Mannion wants the airline to re-assess its cargo operations which were not favoured by the previous management team led by chief executive Willie Walsh.

He believes the recent emphasis on short-haul routes and quick turnarounds of aircraft meant that cargo became less important.

But with the airline now developing a long-haul strategy this view may have to be re-visited.

Under the direction of cargo manager Robert Bullock, the airline is studying several opportunities for growth. For example it may expand the amount of business it does with courier companies, a spokesman said over the weekend.

Aer Lingus is expecting its operating performance to be down significantly in 2005, mainly because of higher fuel prices and intense competition from low-cost carriers like Ryanair.

The company, however, is seeking to compensate through other areas such as ancillary revenues and cargo operations.

Last week Mr Mannion revealed that under a new business plan the airline will need to raise about €2 billion in capital. This is likely to be done via the proceeds of a privatisation sale and bank borrowings.

UBS and AIB Capital Markets are currently assessing the method for selling Aer Lingus, but a looming pension deficit may slow down any sales plan.