Published on June 7th, 2016 | by Jim Lee0
Aer Lingus looks east with Qatar Airways as it continues to refine its expanding transatlantic schedule
Aer Lingus chief executive, Stephen Kavanagh, has confirmed that Aer Lingus and Qatar Airways are in negotiations to start direct flights between Dublin and Doha, the two airline’s respective hubs. Speaking on the side-lines of the IATA AGM in Dublin, Mr. Kavanagh said negotiations were currently ongoing between the sides. For further information on Qatar Airways, see fact sheet here.
“We will be looking at connecting to the Qatar hub either on our metal or on Qatar metal,” he said. He noted that Qatar Airways’ network would help Aer Lingus compete with Middle East carriers Emirates and former shareholder, Etihad Airways, who both fly to Dublin from their Gulf hubs in Dubai and Abu Dhabi, as well as Istanbul Turkish Airlines, currently celebrating ten years in Dublin.
Access to Doha Hamad International and Qatar Airways’ vast network, would allow Aer Lingus to not only expand into the Middle East, but also into Asia and Oceania. “We felt we were bereft of opportunities in the Middle East because of the cornering of world traffic by Etihad and Emirates,” he said. As to when this might happen, he added “in that regard, I think it’s only a matter of time.”
He went on; “Now, we have a stakeholder and partner with Qatar Airways and it is clear that there are natural and significant opportunities to grow the network, not just ourselves but also via codeshares.” He was referring to the fact that Qatar Airways had recently announced it had increased its stake in Aer Lingus parent company, International Airlines Group (IAG), to 15.1%, up from around 12%.
“That is a natural way of exploiting the opportunities that both partners can bring,” he added.
Neither Qatar Airways CEO Akbar Al Baker, who was at the event, or the airline, would comment on the remarks, but Qatar Airways is known to have explored closer relationships with IAG, since buying into the company, in early 2015. Qatar Airways and IAG subsidiary British Airways have a code-share deal and both airlines are members of oneworld®, one of the world’s largest airline alliances. Aer Lingus is considering joining oneworld®, an alliance that brings together 14 of the world’s leading airlines and around 30 affiliates. Mr. Kavanagh has previously said that “there are some advantages to joining the big-boys’ club.”
Aer Lingus plans more U.S. flights and destinations next year
Stephen Kavanagh recently told a luncheon of Washington’s International Aviation Club, to expect even more U.S. flights and destinations next year, adding that the airline sees, “opportunity in the near term to expand frequency and passage on existing gateways” such as JFK for example.
He went on; “once we get into 2017, however, we will be looking at new gateways,” noting that “there are a limited number of gateways that would sustain a wide-body operation, which is the core of our operation. But we have identified a number particularly on the East Coast and in Florida.”
He also confirmed that beyond 2017, the airline was looking for new aircraft with at least 180 seats, to effectively replace the ASL operated Boeing 757s, on routes between Ireland and the East Coast destinations, like Hartford. That could open up new mid-size airports for the carrier to offer more routes to Ireland, and he added, “there are underserved (US) airports where the choice is effectively a drive (to a nearby bigger airport for a nonstop) or a one-stop (via another) hub.” “I’d like to describe us as small, but perfectly formed and fit for purpose,” he said in conclusion.
The 757s have also allowed Aer Lingus to invest in frequency, particularly in the shoulder seasons, but also to allow them to innovate in markets such as Hartford. An ideal replacement would be a single-aisle with the same seat mile costs as an A330-300, which would give the airline complete flexibility, in terms of frequency, and the ability to capacity-manage across the operation.
Aer Lingus Summer 2016 Schedules
Looking at the Summer Transatlantic Schedules it is clear that Aer Lingus is pursuing a policy of growth, with an expanded fleet, new routes and increased schedules. Some of this expansion will have to await the delivery of two new Airbus A330-302s, EI-FNG (c/n 1742) and EI-FNH (c/n 1744), in September. Until then, the fleet will consist of four A330-202s (EI-DAA, EI-DUO, EI-EWR and EI-LAX), four A330-302s (EI-DUZ, EI-EAV, EI-EDY and EI-ELA), four Boeing 757-200s (EI-LBR/S/T and more recently EI-CJX) on wet lease from ASL Ireland and a Boeing 767-200ER, which will be wet leased from Omni Air International, for operation on the Shannon to Boston route between 8th June and 31st August. To counter criticism of lack of brand awareness when a similar aircraft was used last year, the aircraft will be painted white with a green Aer Lingus tail and fuselage titles. Aer Lingus add that that an Aer Lingus ‘flight ambassador’ will be on board each flight “to ensure your journey is as relaxing as possible”.
Looking at the Dublin schedule first, frequency on the Dublin – Boston and Dublin – New York JFK routes, are the same as last year, with two services a day on Boston (EI-137/6 & EI-139/8) and three per day on JFK (EI-103/2, EI-105/4 & EI-107/8). The EI-103/2 is the early morning flight to JFK which is being reintroduced from 9th June and will operate until to 31st August. The daily Boeing 757 flight departs Dublin at 07:50 and arrives in JFK at 10:20 local time. The return flight departs New York at 12 noon arriving into Dublin at 23:40, on the same day. The JFK service operates in competition with Delta Airlines (DL-45/4 with Airbus A330-300s) and American Airlines (AA-291/90 with Boeing 757s).
The Chicago route will also see a significant growth in capacity this summer with an extra weekly flight, bringing the total number of flights to 12 per week. These are the peak daily EI-123/2 and five times weekly EI-125/4. These services also operate in competition with the daily United Airlines Boeing 757-200 service (UA-153/2) and the American Airlines AA-711/10, with Airbus A330-200s. Dublin-Orlando, the EI-121/10 has three services per week, departing Dublin on Tuesdays, Thursdays and Saturdays, down from last year’s four per week, while further afield the Dublin-San Francisco route (the EI-147/6) has a daily service, the same as last year. It is being upgraded from an A330-200 to an A330-300.
The picture relating to Dublin-Washington (Dulles) route, which was first introduced in May 2015, is a bit more complicated. Until the 3rd May the EI-119/8 was operated by A330s at a four per week frequency (Monday, Thursday, Friday and Sunday), but from 4th May, it went daily and is operated by Boeing 757s. It reverts to an A330 from 6th October, but at a five per week frequency following the introduction of the second of the two new A330-300 aircraft due for delivery. This service is operated in competition with United Airlines daily Boeing 757-200 service, the UA-127/6.
The transfer of the Washington route to the Boeing 757 enabled the launch of the new Dublin-Los Angeles A330-200 service, the EI-145/4, operating at a four per week frequency, with effect from 4th May. Airbus A330-200 EI-LAX operated the inaugural service. In spite of competition by Ethiopian Airlines with their early morning Boeing 787-8 Dreamliner service, the ET-504/5, Aer Lingus is confident of its success, with Stephen Kavanagh predicting that, it would go “daily in a short period of time”. With the Boeing 757 being available again from the Washington route, a new Dublin – Hartford route, the EI-131/0, will be inaugurated on 28th September, at a four per week frequency for the first week, but increasing to a full daily frequency from 6th October.
Earlier on 1st September, another ‘new’ service will commence. This is the EI-101/100, from Dublin to Newark Liberty Airport (EWR), operated daily, following the delivery of the first of the two new A330-300s. Again this will operated in competition with the well-established United Airlines daily Boeing 757-200 service, the UA-22/3.
Finally Dublin-Toronto also remains the same as last year, with a daily Boeing 757 service, the EI-129/8. Air Transat and Air Canada Rouge (AC-1929) also operate on this route, while Westjet provides a one stop connection (WS-17), via St John’s (YYT).
Turning to Shannon, the Boston route, the EI-135/4, has a daily frequency throughout the summer, operated by Boeing 757s up to 8th June and then with the afore mentioned wet-leased Omni Air International Boeing 767-200ER through until 31st August, when it reverts to the Boeing 757. The Shannon-JFK route, the EI-111/10, has a six per week frequency with Boeing 757s, which is the same as last year.
Competition on the North Atlantic
The transatlantic market between North America and Europe is still the single largest intercontinental market in the world, but with dozens of airlines offering nonstop service on trans-Atlantic routes, it is also highly competitive. Aer Lingus though Ireland’s geographic location makes it a strong competitor offering a connecting hub for transatlantic routes. While it is the third westernmost European hub, (after Reykjavik and Lisbon), it dwarfs both in terms of origin and destination traffic, by a factor of two in terms of Lisbon, and a factor of four compared to Keflavik. Having had to consolidate its transatlantic schedule in the past, Aer Lingus is returning to long haul growth and has successfully positioned itself well against Ryanair in the short haul market. In addition, it has built up a successful hub operation from UK provincial cities, through Aer Lingus Regional.
A key issue in transatlantic competition is the joint venture partnerships enjoyed by airlines on both sides of the ocean based on the very important global airline alliances, oneworld®, Star Alliance (with 28 member airlines) and SkyTeam (with 20 member airlines). Some consider them anti-competitive, as they provide anti-trust immunity and allow airline partners from either side of the Atlantic to coordinate on prices, schedules, and strategy. This enables them to effectively operate as one airline on transatlantic routes. Together, these joint venture partnerships control close to 75% of capacity across the Atlantic and indeed many analysists believe they enjoy an even higher proportion of revenue. Has this been bad for consumers? Well on average, one way transatlantic air fares are 22% higher than they were in 2000, while domestic air fares are down more than 15% over the same time frame, according to CAPA Centre for Aviation and the Bureau of Transportation Statistics (BTS) respectively.
However, how this trend will develop depends on how the European low cost carriers (LCCs) will influence the market. Dublin has already seen the arrival of WOW Air, while Norwegian Air Shuttle, has managed to rapidly built a reasonable long haul low cost operation, using the very efficient Boeing 787 Dreamliner, with plans to operate its Boeing 737s, on transatlantic routes out of Cork.
However, Aer Lingus is likely to consolidate its position through its ownership by IAG and its future membership of oneworld. The addition of Aer Lingus to this alliance will only increase the pricing power and market control of the joint venture partnerships in spite of the emerging competition from the LCCs. This points to a successful and profitable future for Aer Lingus in the transatlantic market.
How IAG ownership impacts on Aer Lingus long-haul operation
In a recent Interview with Air Transport World, Stephen Kavanagh said they were delighted with the (IAG) integration process so far, which have enabled significant improvements, in cost synergies and revenue generation. However, he described it as “very light touch” and Aer Lingus has retained a great deal of autonomy in many areas and IAG has left the operating companies, including Aer Lingus, “to drive value”. He went on; “We’ve seen the opportunity to accelerate our growth plans, not change the shape of them but accelerate them. It’s been very comfortable; a very good fit. There are excellent relationships with the other operating companies”. “All of the expectations and timings of the transaction have been met or exceeded, so we are very encouraged and we look forward to extracting even more benefits in the coming years” he added.
IAG chief executive Willie Walsh, clearly rates Stephen Kavanagh highly from his time at the airline, and recently stated in an interview that, it was “absolutely clear” to him that he “was the right choice to be CEO” and he confirmed that he had made his view known to the Aer Lingus board adding that; “if it wasn’t going to be Stephen then I would be giving him a job at IAG, because I didn’t think he’d stay if he didn’t get the CEO’s role.”
“We’ll probably add more capacity on some of the existing [Aer Lingus transatlantic] services and potentially another destination in 2017 and I think we’ll do the same again in 2018.”
In relation to the future Aer Lingus long haul fleet, he has said that the Airbus A350-900 could be a step too far for Aer Lingus in size, and he sees the A330neo fuel advantage over the A330ceo as marginal, given that Aer Lingus does not really have what he would call a long-range network. The plan for the Aer Lingus order is “something we’re discussing at the moment” he noted. With talk about the possible case for a couple of A380s for Iberia, there is even talk of one for Aer Lingus, though Aer Lingus’ experience with the Boeing 747 should point to the possible pitfalls of operating such a large aircraft, even in peak periods.
Stephen Kavanagh has said he sees the need for between four and eight of the long range variant of the Airbus A321, for further transatlantic operations. Speaking during the IATA AGM in Dublin, he said that Aer Lingus is, “working very hard” on a business case it plans to present to owner IAG, justifying the need for the aircraft. “That is a business case that we feel we can make and we will make and hopefully we will receive support from IAG. But ultimately we need to demonstrate that there capital would be well spent,” he says.