Monday 22 July 2019

Looking up - Aer Lingus boss is aiming to reach new heights as carrier expands its fleet and routes

In person

Sky’s the limit: Aer Lingus chief executive Sean Doyle is overseeing the delivery of eight new A321LR aeroplanes. Photo: Beatrice Krol
Sky’s the limit: Aer Lingus chief executive Sean Doyle is overseeing the delivery of eight new A321LR aeroplanes. Photo: Beatrice Krol
John Mulligan

John Mulligan

Huge wind turbines dotted around the vast port of Hamburg in northern Germany spin slowly in the breeze under a grey summer's sky. Giant container ships, registered in far-flung places including Singapore and Panama, are being loaded at the wharves. And some of the cargo arriving and departing contains parts and sections of Airbus aircraft.

The port - Germany's largest - and Airbus are Hamburg's two biggest employers, with the European aircraft maker itself having about 15,000 workers in the city. It is the company's largest base outside of its headquarters in Toulouse.

And inside Airbus's manufacturing site at Finkenwerder Airport - a private facility to the south-west of Hamburg - Aer Lingus chief executive Sean Doyle is casting an eye over the interior of what will in a couple of weeks' time be the airline's newest aircraft.

The A321LR - a long-range variant of the Airbus A321 workhorse the airline typically flies on its Dublin-London route - is the first of eight of these jets that Aer Lingus will take delivery of, and will expand its long-haul fleet to 18 aircraft.

Four LRs will come on stream this year and four more in 2020. Last month, Aer Lingus owner IAG ordered six A321XLR aircraft for the Irish carrier. Those aircraft, due to be delivered from 2023, will have an 8,700km range - comfortably outstripping the 7,400km of the A321LR.

"We think the economics are very compelling," says Doyle of the LR and XLR jets. "It's a game-changer for us."

That is not only because they are new jets, but the aircraft are also very efficient from a fuel point of view, and therefore overall unit cost.

"We're able to offer better value," explains Doyle (48). "We compete better with this aircraft than we could have with older-generation technology. Aer Lingus has become very competitive over the past five years.

"We've reduced our unit costs, we've reduced our fares, our airplanes are full, but as we take delivery of new aircraft, we need to remind ourselves of the need to remain competitive."

The first Aer Lingus A321LR delivery was delayed earlier this year, forcing the firm to postpone plans to launch a Dublin to Montreal service this year until next, and to rejig its transatlantic schedule for the current summer season.

Doyle is reluctant to explain what caused the delay or, indeed, what compensation Aer Lingus might be entitled to, if any. "It's confidential. I can't disclose that," he says when pressed.

Aer Lingus is one of the launch customers of the LR. Recently, TAP Air Portugal took delivery of two of the jets, while Air Transat is using LRs leased from Dublin-based AerCap.

The LRs joining Aer Lingus are actually being bought by aircraft leasing giant Air Lease, headed by industry veteran Steven Udvar-Hazy, with the Irish carrier being its customer.

Still, it is down to Aer Lingus to finalise the interior spec, while the big-ticket option of engines is decided in conjunction with Air Lease.

"When you're pushing the boundaries of technology, you commit to a timeline and then things happen in terms of production," says Doyle.

"The industry is experiencing delays in deliveries and we're not immune to it. We had hoped to have four for the summer.

"We're working very hard with Airbus to make sure that we stay on track. But putting new aircraft variants into the industry is complicated."

Doyle, who took over as Aer Lingus chief executive from predecessor Stephen Kavanagh in January, is obviously taken with the new jet and mentions to a colleague that he must send a photo to the Air Lease CEO.

The seat layout Aer Lingus has opted for in its new LR aircraft includes 16 in business class and 168 in economy. The economy seats were manufactured at Collins Aerospace in Kilkeel, Co Down - now part of the US giant formed earlier this year through the merger of Rockwell Collins and United Technologies.

The business-class seating was manufactured by Thompson Aero Seating in Portadown in Co Armagh.

"It's as good as a wide-body [jet]," insists Doyle of the A321LR product standard. But for Aer Lingus, this jet is about much more than simply having a shiny new piece of kit in the fleet.

It is the continuation and expansion of a strategy that has seen Aer Lingus - part of IAG since it was acquired for €1.3bn in 2015 - significantly boost its route network in North America. It currently services 15 destinations there - a far cry from when Boston and New York were its only outposts on the far side of the Atlantic. Within five years, it will boast 30 transatlantic jets.

In part, the expansion has been fuelled using single-aisle jets - leased Boeing 757s for now - to operate services where it would not necessarily be able to fill larger, wide-body jets. It will also enable it to have greater frequencies on those thinner routes, something that is essential as Aer Lingus builds out Dublin Airport into a transatlantic hub.

"We are keen to capitalise on the momentum," says Doyle, who joined Aer Lingus from British Airways (also an IAG company alongside Iberia, Vueling and Level), where he was network, fleet and alliances director.

"The growth story is something that's very compelling and exciting. This is the next phase of innovation. You can get into markets that are a little bit thinner than you would need to make 330 seats on an A330 work," explains the Youghal native as he sits in the business cabin of the new A321LR.

"It isn't as big a cabin to fill as the wide-bodies, so in terms of year-round operations, it works very well."

Beginning in October, Aer Lingus will also deploy the LR jets on short-haul routes to London and mainland Europe.

"It gives us an opportunity to put a significant number of AerSpace seats [its new premium short-haul service that is being introduced from September 1] into the markets we rotate this into," Doyle points out. "In the big European destinations, like Paris or Heathrow, you'll do a sector using this aircraft when it comes in from a US destination and we can offer this as a short-haul product," he explains.

"There's a niche there that we're able to tap into. You wouldn't rotate every single aircraft in [to a short-haul route], but we may look at putting three or four in on a morning rotation."

Last week, Aer Lingus commenced a service between Dublin and Minneapolis-St Paul, while the A321LR Doyle is sitting in will be deployed on the route between Dublin and Hartford, Connecticut, from August 2.

The Minneapolis-St Paul route, currently operated with a leased Boeing 757, will switch to an LR beginning in the 2020 winter season.

"We're still working on plans for how we will deploy the additional aircraft that come," adds Doyle. "My guess is that we'll look at a combination of reinforcing the quality of the schedule we provide to the markets we're already in on the east coast, and we're looking at other destinations we can add to the map. We'll be disclosing that in the coming months."

While the LRs and XLRs will be used to flesh out existing routes to North America, Aer Lingus has also previously identified cities including Denver, Las Vegas and Vancouver as potential destinations.

Dallas has been eyed too, with American Airlines having launched a seasonal route between the city and Dublin this summer.

Using the LRs and XLRs to potentially service at least some of those routes had been previously mooted.

Doyle says his sense is that cities such as Denver and Las Vegas would require wide-body aircraft.

"I think they're big markets and there seems to be growing demand there, so they would be in the framework of what we're evaluating at the minute," he adds.

"The A330 works very, very well on the west coast markets," says the chief executive. It is also used on routes to New York and Boston.

"You can supplement it both from a schedule perspective and a network breadth perspective with a narrowbody operation," he adds. "A direct service is a very important part of what foreign direct investors will look to when they want to come and invest in Ireland."

The LRs could reach pockets of the US mid-west, with the XLR adding that extra 1,100km or so.

"That gives you a wider circle, but when you operate them, you get to understand the range in a bit more detail," says Doyle.

What Aer Lingus is offering as a single-aisle transatlantic product is very different to what Norwegian was offering with the Boeing 737 Max until it was grounded earlier this year, or Canadian low-cost carrier Westjet, which operates a seasonal narrowbody aircraft between Halifax in Canada and Dublin (WestJet also intended to use a Max this year, but is now using a 737-700 on the route).

While customers might be willing to make relatively short-hop, five-hour flights to the US east coast on a narrowbody aeroplane, it is easy to wonder if they will be as keen to travel much further west on a single-aisle jet, notwithstanding the fact that the seat pitch, for instance, is similar on the LR to that on a bigger A330.

Doyle, naturally, insists they will, and that the jet does work when targeted at the right routes.

"We've had experience of the narrowbody through the 757 that we've operated for a number of years now," he points out.

"What we see is that guest satisfaction with the narrowbody is very much on a par with what we have on the wide-body," he insists.

The continuing development of Dublin as a transatlantic hub - it is one of the top five hubs in Europe for flights to North America - is a major strategic objective for Aer Lingus and the airport operator, the DAA.

"The location of the Dublin hub in terms of its proximity to the North Atlantic markets, and the US in particular, really makes this a great opportunity for Aer Lingus," explains Doyle.

Typically, between 40pc and 50pc of the airline's transatlantic flyers are transfer passengers, but it depends on specific routes and the time of year.

"We're about 3pc of the North Atlantic market at the moment. Considering how strong the Aer Lingus brand is, how competitive the business model is and the location of the hub, I think we have huge growth potential," insists Doyle.

The network between North America and Europe is the biggest long-haul market in the world.

The airline boss says he does not think it would be an unrealistic assumption that Aer Lingus could get to a 5pc or 6pc share of the market in the coming years. "We're very encouraged by what we're seeing on our North Atlantic network. Dublin is becoming much more ubiquitous as a hub," he explains.

"One of the things that sustains our business outside of summer is the development of the hub and the development of connectivity."

But the development of Dublin as a hub is at least in part dependent on how fast the DAA can deploy new infrastructure.

Apart from the €300m runway being built at Dublin Airport, the semi-State company is spending more than €1bn on other projects, such as additional stands, new apron space, passenger transit areas and other facilities.

IAG boss Willie Walsh has previously criticised what he perceived to be a slow pace of development, but nevertheless, Aer Lingus and other airlines have continued to add routes and frequencies at the gateway, despite some grousing.

More recently, the Commission for Aviation Regulation set out an initial determination that if implemented will see passenger charges at Dublin Airport fall 15pc between 2020 and 2024. Good for airlines on the face of it, but the DAA has questioned the provisional decision, claiming it "risks creating stagnation" at the gateway and could stifle investment.

"We've always been clear that the infrastructure is absolutely critical to fulfil the potential of Dublin," says Doyle. "The regulator has a job to do in making sure the infrastructure is built efficiently."

He also believes that Dublin Airport could probably handle about 40 million passengers a year with current infrastructure, without the need for a third terminal.

Last year, Dublin handled 31.5 million passengers - a figure that could hit about 33 million this year.

DAA chief executive Dalton Philips has said he thinks Dublin Airport could handle 55 million passengers a year without a third terminal.

A report prepared for Transport Minister Shane Ross has suggested a new terminal will be needed by 2031.

"We do believe it's about runway infrastructure, it's about more piers, and that at this part of the cycle, additional terminals isn't the critical priority," says Doyle.

"What we will do is keep reminding people of the opportunity, and make sure that we all kick towards that goal."

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