Sunday 4 December 2016

Ryanair stake in Aer Lingus 'puts off' potential investors

Chief executive Mueller says new strategy to include faster check-ins

Published 27/01/2010 | 05:00

Cabin Crew Lisa Rea of Aer Arann and
Karolina Sawczak of Aer Lingus at the
signing of the franchise agreement
Cabin Crew Lisa Rea of Aer Arann and Karolina Sawczak of Aer Lingus at the signing of the franchise agreement

Ryanair's near 30pc stake in Aer Lingus is "limiting the appetite of other potentially interested parties" in the former state-owned airline, said its chief executive Christoph Mueller yesterday.

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He made the comment to investors in London as he sketched a new strategy for Aer Lingus that will include faster check-in times, saying "goodbye" to point-to-point long-haul expansion growth and trying to boost ancillary revenues.

He also warned that Aer Lingus expected the first half of 2010 to be "particularly weak" for the carrier and that full-year 2010 revenue would be below that reported in 2009.

Franchise

Aer Lingus also confirmed that it had signed a franchise agreement with Aer Arann, which would allow customers to book flights on the Aer Lingus website from a number of UK airports such as Brighton and Durham Tees Valley to Dublin and Cork.

The flights will be operated by Aer Arann's smaller turbo-prop aircraft, but could help to secure some onward traffic for Aer Lingus to the US.

Setting out his stall, Mr Mueller said that a low-cost carrier model was "unsustainable" for Aer Lingus, as he effectively signalled the carrier would not attempt to mimic Ryanair by lowering fares and reducing its offer to a basic flight service. He added that Aer Lingus "does not believe in the low-cost model".

"We do not believe that it is sustainable for us. We do not really believe that it is sustainable for the low-cost carrier," Mr Mueller told investors.

Among his audience in London was Ryanair's head of treasury, Jimmy Dempsey, as well as the low-cost airline's financial controller, Neil Sorohan.

"You cannot build a strategy on unique moments in aviation history," he added, referring to Ryanair's decision early in 2002 to ink a cut-price deal with Boeing to buy up to 150 aircraft in the wake of the previous year's US terrorist attacks.

He also maintained yesterday that marketing deals offered by secondary airports such as those that Ryanair flies to are "more and more unsustainable". Taxpayers are not prepared, especially during a recession, to "endlessly" cross-subsidise such facilities, claimed Mr Mueller.

"We will keep servicing central airports," he said. That's a strategy more in line with that of EasyJet. He also declined to comment as to what airlines might be put off expressing an interest in Aer Lingus due to Ryanair's substantial holding.

The chief executive said a large number of the 700 planned job cuts at Aer Lingus would be implemented by the end of the summer after deals with unions and staff were broadly agreed before Christmas.

Redundancy packages will cost the airline around €40m this year, while the full annual €97m in savings from its 'Project Greenfield' rationalisation plan will be realised in 2012.

Shares in Aer Lingus closed up more than 1pc higher at 70c yesterday.

Irish Independent

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