Wednesday 26 October 2016

IAG would reap rewards of Aer Lingus traffic surge

Published 09/04/2015 | 02:30

Aer Lingus
Aer Lingus

Strong passenger growth on Aer Lingus transatlantic services has cemented IAG's business case for its planned €1.4bn takeover of the airline.

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Aer Lingus said that passenger numbers on its routes to North America - primarily the United States - soared over 25pc last month to 94,000 as it expanded services across the Atlantic.

IAG, headed by Willie Walsh, wants to buy Aer Lingus to tap into transatlantic passenger growth out of Dublin. The Government is next week expected to examine a report prepared by a review group it appointed to determine whether or not it should sell its 25.1pc stake in Aer Lingus to IAG.

The Irish airline has had considerable success in luring passengers from the UK and mainland Europe to Dublin to use the city as a transfer point for onward travel to North America, and particularly the US.

Mr Walsh has previously said that he sees significant potential to further expand Aer Lingus transatlantic services out of Dublin if he succeeds in buying the airline.

Aer Lingus Regional, the service operated on a franchise basis by Stobart Air, has been an important tool in fuelling the transatlantic passenger growth from Dublin. It draws flyers from UK regional cities to Dublin, many of whom continue their journey from there to the US.

It carried 96,000 passengers last month, 2.1pc more than it did in March last year, according to figures published yesterday.

Stobart Air's managing director, Sean Brogan, recently predicted that Aer Lingus Regional would have access to one million transfer passengers in the UK if the IAG takeover of Aer Lingus goes ahead.

Aer Lingus has just expanded its Dublin-San Francisco route to a daily service and next month will launch a service between Dublin and Washington DC. Total transatlantic capacity at the airline will be more than 18pc higher this summer than it was in summer 2014.

Later this year, Aer Lingus is also increasing services to Chicago for the winter.

The long-haul expansion was spearheaded by newly-appointed Aer Lingus chief executive Stephen Kavanagh in his previous role as chief strategy and planning officer.

But while long-haul traffic has been soaring, Aer Lingus is facing challenging conditions on its short-haul network as it faces increasing competition from Ryanair.

Passenger traffic on those Aer Lingus routes dipped slightly to 625,000 last month as it cut capacity to maintain profit margins.

"Overall these results highlight the continued trend of a strong long-haul delivery with a continued sluggish passenger growth development for the short-haul network," said David Holohan, the head of research at Merrion Capital.

"To the management team's credit, they are successfully adapting the short-haul network and capacity levels in order to increase profit margins, but the main challenge will be on growing passenger numbers meaningfully given the significant increase in those that are flying on low cost carriers."

Earlier this week, Ryanair revealed a surge in passenger numbers during March and attributed the boost to its revamped image, customer service initiatives and efforts to attract more families and business travellers.

It carried 6.67 million passengers last month, 28pc more than it did in March last year.

That brought the tally for its full financial year to 90.5 million - a record, and better than even the airline expected.

Irish Independent

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