Tuesday 25 October 2016

Aer Lingus the real winner from any Ryanair interlining deal

Low-cost carrier's through-ticket partnership would strengthen rival airline's hand even further, writes Colm McCarthy

Published 16/08/2015 | 02:30

DOMINANCE: Ryanair’s deal would add to the viability of Aer Lingus expanding its list of North American destinations
DOMINANCE: Ryanair’s deal would add to the viability of Aer Lingus expanding its list of North American destinations

Last Tuesday's announcement from Ryanair that Europe's biggest carrier may commence interlining with long-haul airlines is hugely significant for Aer Lingus and for Dublin Airport.

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At present, customers cannot book through-tickets with Ryanair, or indeed with most other low-cost airlines, on to the intercontinental flights operated by the full service operators.

Suppose you wish to travel from Glasgow to San Francisco, a route not served with a direct flight. You can book on Aer Lingus to Dublin and transfer on to the same airline's onward service.

Alternatively, you can book on a Ryanair flight for the shorter leg, but you are on your own if you miss the connection. You have booked two completely separate tickets. You must collect your own checked luggage at Dublin, check in again from scratch and re-book at your own expense if you miss the second flight. But if the carriers offer interlining and a through-ticket, you check in once for the whole trip and the airlines are responsible for any costs of missed connections. At some hub airports, up to half the long-haul passengers are interlining.

The low-cost airlines in Europe have until recently steered clear of the interlining business, concentrating on point-to-point traffic. But this means they are missing out on substantial potential traffic while passengers are denied a wider range of hassle-free connections.

Some low-cost airlines have already begun to offer interlining opportunities, including Vueling, a Spanish member of the IAG group to which Aer Lingus will shortly belong. Vueling connects with Iberia long-haul flights at Madrid. In the USA, the leading low-cost carrier Southwest also provides connecting tickets, as does Norwegian in Europe.

If Ryanair goes through with its plans to offer connections to the long-haul flights of other airlines, the largest immediate impact is likely to be at Dublin Airport. The biggest long-haul hubs in Europe are London's Heathrow, Charles de Gaulle in Paris, Frankfurt, Madrid and Amsterdam. The low-cost airlines have very few services into these airports. For Ryanair and easyJet, the figures for Tuesday last, along with the numbers for Dublin, make interesting reading (see accompanying chart).

In the last few years, Aer Lingus at Dublin has built a transatlantic connecting business, adding new North American destinations and increased frequencies. The success of these efforts has been cited by Willie Walsh of IAG as a principal motive for that company's acquisition of Aer Lingus. Walsh sees potential for more routes and higher frequencies, winning non-Irish connecting business for Dublin from competing European hubs.

If Ryanair does a deal to offer connections at Dublin, the potential for Aer Lingus in this market would be enhanced dramatically.

The number of short-haul connections into Dublin last Tuesday was 110 from Aer Lingus and its regional partner, along with 88 from Ryanair to give a total of almost 200. There are some additional connections from other IAG member airlines with which Aer Lingus either has, or will have, interline agreements.

The Ryanair planes, it should be noted, are on average larger than the Aer Lingus short-haul fleet, so the number of short-haul passengers delivered into Dublin by Ryanair actally exceeds the Aer Lingus total. Ryanair serves some routes which do not have Aer Lingus connections at all. On those that do, interlining would expand greatly the flight frequency and hence connecting opportunities. At present, there is no coordination of flight timings between Aer Lingus and Ryanair at Dublin, so two planes can arrive together from various British and European cities. An interlining and code-share agreement would likely see shorter connecting times without the need to add frequencies. This could be a major synergy if a deal is done, also facilitating smoothing out of the morning peak at Dublin which is beginning to congest the main runway in summer.

The link-up of Aer Lingus with IAG will see it re-join the Oneworld airline alliance and this is expected to enhance its transatlantic business with or without a new deal to feed passengers from Ryanair. The US partner will be American Airlines, one of the three network carriers to have emerged from the consolidation of the airline industry there. This means Aer Lingus will drop its existing code-shares with United Airlines and with Jetblue, linking instead to American and its recent acquisition US Airways. Both of these airlines already serve Dublin (American to Chicago and New York, US Airways to its hubs at Philadelphia and Charlotte). These routes could soon carry Aer Lingus flight numbers and be bookable through the distribution systems of BA and Iberia in Europe as well as through the new US partners. Aer Lingus flights should also become bookable through the frequent flier programmes of both BA and American.

Aer Lingus services from Dublin to North America compete with airlines in membership of the Skyteam alliance (Delta) and the Star alliance (United and Air Canada). These airlines enjoy extensive short-haul feed at their North American origin points but are unable to offer attractive onward connections from Dublin into Britain and Europe. Their European partners simply do not have substantial services at Dublin, which is dominated by Aer Lingus and Ryanair.

If the negotiations with the Oneworld partners follow the obvious path, Aer Lingus will be able to offer strong connecting networks at both ends of the long-haul segment, a huge competitive advantage. A deal to connect Ryanair passengers at Dublin would strengthen the Aer Lingus position even further.

Aer Lingus is considering additions to its current list of seven North American destinations. The existing Oneworld partners in Europe have services to the American Airlines hubs at Miami and Dallas, neither currently served from Dublin. These destinations must be on the Aer Lingus agenda for the longer term and there is scope for higher capacity on existing routes as well as year-round services on routes currently confined to the summer period. An interlining deal with Ryanair would add greatly to the viability of any such expansion plans.

Dublin airport will never become a major 360 degree airline hub - it is too far west for that. The opportunity is in transatlantic connections exploiting the strong short-haul network into Britain and Europe, which could be effectively doubled in reach and capacity if Ryanair opts for interlining. Traffic growth at Dublin has been strong over the last couple of years, boosted by economic recovery, its fortunate location at the node of the island's motorway network and the success to date of Aer Lingus on the Atlantic.

The completion of Terminal 2 means passenger capacity is more than adequate for now, but at some stage over the next few years Dublin will need a second parallel runway, for which planning permission has already been granted. The required lands are inside the existing airport boundary. The project was deferred when recession struck but recent and prospective traffic growth have brought it back on the agenda.

The writer is a non-executive director of DAA plc, the operator of Dublin and Cork airports.

Sunday Independent

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