Alliance necessary for development

Aer Lingus has hardly been out of the headlines in recent months, mainly due to the events at TEAM. And the tricky issues which surround it entering a strategic alliance will ensure that more controversy lies ahead.

The sale of TEAM to FLS finally cleared the way for Aer Lingus to consider the issue of a strategic alliance with one of the four or five international groupings set to dominate the industry.

The benefits of membership of such an alliance are clear. They involve developing so-called code-sharing arrangements whereby customers from Ireland can book through the Aer Lingus network for flights almost anywhere in the world. The airline would also benefit from a feed of traffic into its own routes from its partners and would hope to build its profitable trans-Atlantic business.

An alliance would also stop Aer Lingus from being pushed aside by other emerging major players, particularly the planned British Airways/American Airways alliance, which when completed could pose a serious threat.

Ironically, the British Airways/ American Airways alliance, which may include a further seven airlines, is one group with which Aer Lingus could link. The other major alliances are the STAR alliance - led by Lufthansa and Unite; the KLM/Northwest alliance and the Atlantic alliance led by Delta and Swissair. Aer Lingus is now likely to enter discussions with the major airlines leading these alliances, with a view to quickly identifying one alliance it wants to join - and which has members interested in Aer Lingus.

Once serious discussions start with a partner, then a key question will be whether one of the big airlines in the alliance takes an equity stake in Aer Lingus. This would provide Aer Lingus with an injection of funds to be spent on fleet investment and the airline feels that this could then be followed by a flotation of some of its shares on the stockmarket to raise further money.

No doubt Aer Lingus is confident from its initial contacts that there are at least a couple of major international airlines which would be interested in such an arrangement.