Bloomberg News

Aer Lingus Seeks to Fly Short-Haul Routes for European Majors

April 23, 2013

Aer Lingus Group Plc (AERL), Ireland’s national carrier, said it’s working on plans to fly short-haul routes for major European airlines keen to exit unprofitable services while retaining feeder traffic to their hubs.

Accords with Virgin Atlantic Airways Ltd. and Nova Airlines AB of Sweden mark the beginning of the contract-flying strategy, with Aer Lingus pursuing outsourcing work with larger carriers, Chief Executive Officer Christoph Mueller said. Expanded U.S. services using Boeing Co. (BA:US) 757s are also under review.

Demand for so-called wet-leasing, when both crews and jets are provided, should increase as companies including Air France- KLM Group (AF), Deutsche Lufthansa AG (LHA) and Alitalia SpA seek to pare expenses while maintaining access to key markets, Mueller said in an interview. There may be 500 jets flying unprofitable European routes solely to help fill long-haul planes based at hubs such as London Heathrow and Amsterdam Schiphol, he said.

“This is one of the markets we want to focus on, whether under our own brand, a Virgin Atlantic-type of model or simply as a white-tail,” Mueller said, referring to the industry term for an unbranded aircraft. The wet-lease model could best be developed at Heathrow, which lost a neutral feeder carrier with the takeover last year of BMI by British Airways (IAG), he added.

Improved Utilization

Aer Lingus could turn a profit by building up a sequence of operating slots at airports where most carriers might have only a few each day, improving aircraft utilization, Mueller said.

At Heathrow, the 23 pairs of take-off and landing positions that Aer Lingus uses for its own flights mean it could make better use than other carriers of single slots that might become free, bundling them with the existing holdings.

Capacity restraints at Europe’s busiest airport compel some carriers to have jets standing idle for three hours rather than the optimum 25 minutes, according to Mueller. While short-haul flights away from top hubs are dominated by Ryanair Holdings Plc (RYA) and its low-cost peers, no discount airlines fly to Heathrow.

The purchase of BMI by BA parent IAG SA drove Aer Lingus’s first foray into charter flying, when the Dublin-based company was selected by Virgin Atlantic to operate four fully crewed Airbus SAS (EAD) A320 single-aisle planes on domestic U.K. routes.

The service, which replaced Virgin’s code-sharing deal with BMI, provides Richard Branson’s long-haul specialist with feeder traffic at Heathrow from Manchester and Scotland.

Nova, JetBlue

Aer Lingus has also agreed to operate an Airbus A330-200 wide-body from Scandinavia to destinations in the Caribbean on behalf of Nova’s Novair brand for the next two winters, with an option for a third. The plane would otherwise have been idle outside of the summer, when it’s used on trans-Atlantic flights.

In a separate agreement, Aer Lingus this month began a one- way code-share with JetBlue Airways Corp. (JBLU:US) to 33 U.S. cities. The accord could be expanded if Aer Lingus grows its network, David Barger, JetBlue’s chief executive officer, said April 11.

Aer Lingus is considering leasing Boeing 757s to fly to the U.S. from Shannon, Ireland, the Clare Herald newspaper reported March 11. Using the long-range single-aisle model would allow year-round operation of routes currently viable only in the summer when operated by the carrier’s bigger A330 planes.

Such a deal is “one of a number of business cases currently under review,” spokesman Declan Kearney in an e-mail.

Aer Lingus will release an interim management statement for the three months ended March 31 tomorrow.

To contact the reporter on this story: Kari Lundgren in London at klundgren2@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net


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