Aer Lingus

Aer Lingus

Aer Lingus Group Plc (“Aer Lingus”) is the flag carrier of Ireland, the country’s oldest existing airline and the second largest after rival carrier, Ryanair. Formed in 1936 and headquartered on the grounds of Dublin Airport, Aer Lingus celebrated its 75th anniversary in 2011. The name is an anglicisation of the Irish “Aer Loingeas”, roughly meaning “air fleet”.

Aer Lingus  made a pre-tax profit of 84.4m Euros (£72m) in 2011, up from 27.2m Euros a year earlier, thanks to cost-cutting. Its revenues rose 6% to 1.3bn Euros.

In 2010, Aer Lingus flew 9.3 million passengers on its various routes. It operates a short-haul European network with over 60 destinations, although some of these are served only on a seasonal basis. It also serves five long-haul destinations in the United States: Boston, Chicago, Orlando, Washington DC and New York. Orlando is its longest route.

Aer Lingus previously served Baltimore/Washington, Dubai, Los Angeles, Montreal, Newark, and San Francisco. In June 2009, the carrier suspended its services between Shannon-Chicago and its direct Dublin-Washington DC route. It still offers a connection to Washington DC in a code-share flight operated by Jet Blue Airways and Aer Lingus via New York. The Shannon-New York (JFK) route has been “kept under close review” but the Irish Government reportedly wants this connection to remain open.

Aer Lingus is 29.4% owned by its rival, Ryanair, and 25.4% owned by the Irish Government. The airline was floated on the Dublin and London Stock Exchanges on 2 October 2006 (ISEQ: EIL1, LSE: AERL), following prior government approval (the government previously owned 85% of the airline). The principal group companies include Aer Lingus Limited, Aer Lingus Beachey Limited, Aer Lingus (Ireland) Limited and Dirnan Insurance Company Limited, all of which are wholly owned.

Michael O’Leary of Ryanair later moaned about his investment in Aer Lingus – but this did not prevent him from making a further 2012 hostile takeover bid (see below).

In the early 200s, Aer Lingus experienced difficulties following the September 11 attacks, which weakened consumer demand for air travel. Staff numbers were cut, destinations were dropped and the fleet was reduced. The airline managed to weather the storm and return to profit. Its strategy included lowering its cost base, updating its fleet with modern Airbus equipment and developing new routes to mainland European destinations, which had previously been neglected in favour of US and British routes. Aer Lingus positioned itself as “some frills” competition to the European no-frills airlines, while also offering intercontinental flights. The carrier withdrew from the Oneworld airline alliance in March 2007: its repositioning as a low-cost carrier didn’t fit with Oneworld’s targeting of the premium, international frequent flyer. Aer Lingus is today a hybrid between a traditional legacy airline and a low-cost carrier.

In February 2007, Aer Lingus announced a new alliance with JetBlue Airways so that customers could book JetBlue destinations from the Aer Lingus website. In 2008, it also announced an alliance with United Airlines for connecting services within the US.

In August 2007, Aer Lingus established its first base outside of the Republic of Ireland at Belfast International Airport in Northern Ireland. Services from Belfast International commenced in December 2007. Then, in December 2008, the carrier announced the opening of a base at Gatwick Airport – initially serving eight destinations with six more added in 2009. Aircraft numbers at Gatwick were reduced in 2001, because of weak demand for air travel. The short-haul destinations now served from Gatwick are: Dublin, Knock, Malga and Cork. Gatwick is the carrier’s biggest base outside Ireland.

Aer Lingus has previously repelled two takeover bids from rival Irish carrier, Ryanair, and on June 19, 2012, it was subjected to a third hostile takeover bid by Michael O’Leary’s airline. The proposed 649m Euro takeover (i.e. lower than the previous two bids). On 19 December, 2012, the Irish government said that it would block Ryanair’s bid to take over Aer Lingus, after probing the bid on competition grounds. The European Commission turned down the takeover bid in February 2013 for competition policy reasons.

On 1 October 2006, Ryanair launched its first bid to buy Aer Lingus: the company had bought a 16% stake in its rival and was offering €2.80 for remaining shares. On the same day, Aer Lingus rejected the bid. On 5 October, 2006, Ryanair confirmed that it had raised its stake to 19.2%, and suggested the Irish Government could keep its 28.3%. On 29 November, 2006, Ryanair confirmed it had taken its stake to 26.2% of the airline. On 21 December 2006, Ryanair withdrew its current bid for Aer Lingus, with the intent of pursuing another bid after the European Commission had finished investigating the scenario. The EC was concerned that the takeover would reduce consumer choice and increase fares. On 27 June 2007, the European Commission announced its decision to block the bid on competition grounds, saying that the two airlines controlled more than 80% of all European flights to and from Dublin airport.

On 1 December, 2008, Ryanair launched its second takeover bid of Aer Lingus, making an all-cash offer of €748 million (£619mil; US$950mil). The offer was a 28% premium on the value of Aer Lingus stock during the preceding 30 days. The Aer Lingus board rejected the offer and advised its shareholders to take no action. The offer was eventually rejected by the majority of shareholders. The Irish Government deemed O’Leary’s offer as “undervaluing the airline”. It said a Ryanair takeover would have a “significant negative impact” on competition in the industry. Ryanair’s stake in Aer Lingus has been investigated by competition regulators in the UK.

The recession has caused Aer Lingus to reduce its transatlantic services and to rationalise. At the end of June 2009, the company had accumulated losses of €93 million and a radical cost cutting plan ensued that would lead to the loss of 676 jobs at the company, as well as resulting in pay and pension reductions. The current chairman is German-born Christoph Müller (alternative spelling “Mueller”), former head of TUI Travel and Sabena, who joined Aer Lingus on 1 October 2009.

In January 2010, Aer Lingus announced advanced talks with Irish regional airline, Aer Arann, about a possible commercial alliance that would see Aer Arann provide feeder services for Aer Lingus flights between Dublin/Cork and UK regional airports. The deal resulted in Aer Lingus bulk buying seats on Aer Arann services and branding as “Aer Lingus Regional”, with flights operated with Aer Arann aircraft and crew. The flights are available via the Aer Lingus website.

Aer Lingus operates a Gold Circle Club frequent flyer programme. It consists of three tiers, Gold Circle, Gold Circle Prestige and Gold Circle Elite.

BAW verdict: A good option for those who don’t like the nastier, no-frills end of low-cost flying.

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