Sunday 23 October 2016

Aer Lingus sale will give us more choice - not lower fares

Eoghan Corry

Published 28/05/2015 | 02:30

'The humble consumer has not yet been heard in the chorus of opinion debating the proposed sale of the slanty shamrock'
'The humble consumer has not yet been heard in the chorus of opinion debating the proposed sale of the slanty shamrock'

The humble consumer has not yet been heard in the chorus of opinion debating the proposed sale of the slanty shamrock. IAG is good news for the consumer at one level: choice. At another level, price, it may not be such good news. It is a truism of the skies that consolidation is ALWAYS bad for air fares.

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It is competition that drives fares down, not low costs. When fuel prices went down last year, most of the airlines put their fares up, not down. Aer Lingus won't be jacking up prices soon. It competes directly with BA on just one route, Dublin to Heathrow, and only for the past three years.

Ryanair will keep Aer Lingus nimble on the short-haul routes where the two airlines go head-to-head - approximately 40 city pairs.

Airlines - all airlines - never prioritise the consumer.

They look after their own shareholders first. Their operations are programmed to reduce services and pump up fares wherever they can.

In the case of IAG, that could mean the end of some of our cheaper indirect services.

In many cases, you can fly cheaper from Dublin to the USA transferring through London than you can if you start your journey in London. We have direct daily flights to San Francisco, but passengers can save €200 by flying through London. British Airways likes to dump low prices in Aer Lingus's back yard rather than affect its business model and price structure close to home. It is one of the weirder things that happens in a profoundly weird industry.

It is also unclear what will happen on transatlantic routes, where Aer Lingus's direct service competes with America, BA's Oneworld partner, and BA's own indirect services.

The temptation for IAG will be to do what airlines always do, and trim services to get higher fares.

The most obvious and happiest outcome of the sale will be more direct routes off the island and the eight new aircraft which are coming as part of the deal: not just the long desired transatlantic services to places like Dallas and Denver, but the other cities of Europe that will be used to feed the new raft of transatlantic services that will be rolled out next year.

Already, 30pc of Aer Lingus passengers come from "behind" Dublin on the Irish side, and 20pc are from "beyond" the gateway destinations on the American side.

These new passengers mean that Aer Lingus is able, for the first time, to take advantage of Ireland's geographical location.

The prospective takeover of Aer Lingus will bring much needed financial and marketing muscle behind that operation.

They are under-performing at the moment. Aer Lingus serves just seven US and Canadian destinations and 68 weekly transatlantic frequencies: Icelandair serves 13.

Dublin will not just be a third runway for Heathrow. It is almost a short-haul flight to the USA: our reach to north-eastern USA is no further than the Canary Islands are from Scandinavia.

Scotland has been cited as an example of what can go wrong with international aviation. When British Caledonian Airways turned its focus to Gatwick and then was taken over by BA, it left Scotland badly served for transatlantic services.

Scotland's Middle East services have been growing apace with Dublin (in some cases, they have triple daily services where we have double daily), but their transatlantic traffic was neglected. Ireland will be feeding Scottish passengers into its transatlantic network, as it will England and Wales.

This hubbing of Dublin - the brainchild of Stephen Kavanagh, now the CEO of Aer Lingus - and Paul Schultz when he was CEO of Aer Arann, was already under way.

The difference is that now Aer Lingus will have access to the funds and the marketing muscle to help them do it.

We saw the problems most recently in the hasty rescheduling of A350 deliveries, that we witnessed in recent years when Aer Lingus went to the brink.

The airline came close to bankruptcy in 2009, for the fourth time in its history.

If that had happened we would have had a real connectivity deficit to address. Thanks to IAG, the danger of that happening again has passed.

Irish Independent

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