IAG’s bid for Aer Lingus looks certain to go ahead. What do we know now?

London Air Travel » Aer Lingus » IAG’s bid for Aer Lingus looks certain to go ahead. What do we know now?

Aer Lingus Airbus A320
Aer Lingus Airbus A320 (By BriYYZ via Wikimedia Commons)

Following the news that the Irish Government has given its support for International Airlines Group’s bid for Aer Lingus and that Ryanair (which holds 30% of the shares in the airline) has also agreed to sell its stake, this means that, barring any last minute complications, it is now a near certainty that the bid will go ahead.

Full details of the bid can be viewed in the offer document. A more easily digestable summary of IAG’s bid for Aer Lingus can be viewed in this IAG presentation.

Here’s a summary of what we know (and don’t know) and what we expect to happen when Aer Lingus joins IAG:

1.  What does International Airlines Group gain from buying Aer Lingus?

a) Aer Lingus operates a relatively small, but growing, network of transatlantic flights from two of the only airports in Europe with US immigration and customs pre-clearance (Dublin and Shannon). This makes it a very attractive hub for connecting traffic.

b) Aer Lingus has a substantially larger, in terms of destinations, presence in UK regional airports than British Airways.  

BA will through Aer Lingus, gain or regain a presence in cities such as Birmingham, Bristol,  Cardiff, Doncaster/Sheffield, Liverpool and Newquay and East Midlands Airport where there is currently no BA presence.

2. What we know will happen

a) Aer Lingus will retain its own brand and have its own management in Dublin.

b) Aer Lingus will rejoin the Oneworld alliance.

c) Aer Lingus will join the transatlantic joint-venture between American Airlines, British Airways, Finnair and Iberia. This will mean full codesharing and joint scheduling and marketing of transatlantic routes.

d) IAG will expand the Aer Lingus transatlantic network adding up to four new transatlantic destinations with two due to launch in summer 2016. IAG has not given any indication what these may be but safe bets are Miami, Los Angeles and Dallas Fort Worth (these are all hubs of American Airlines). This will complement existing services to cities such as New York, Boston, Chicago, San Francisco and Washington.

e) Aer Lingus’ 23 slot pairs at London Heathrow (which represent just over 3% of the airport’s slots), cannot be sold, including to other IAG airlines. 

f) Aer Lingus will maintain its existing frequencies from London Heathrow to Dublin (up to 13 daily), Cork (4 daily) and Shannon (3 daily) for a period of seven years. Aer Lingus will take IAG’s share of slots at London Heathrow to over 50%.  Initial indications are that some slots may be forfeited to assuage competition concerns.

g) Aer Lingus will maintain a presence at London Heathrow Terminal 2, making it the only Oneworld member airline in a terminal largely occupied by Star Alliance airlines.

h) Aer Lingus will also maintain its presence at London Gatwick where it operates routes to Dublin and Knock.

i) Aer Lingus will benefit from additional co-operation with IAG airlines, beyond joining Oneworld and the transatlantic joint-venture. This could include, for example, co-location in part with BA at London Heathrow Terminal 3 or 5 and co-operation and codesharing with Iberia and Vueling.

j) The Aer Lingus “Gold Cirle” frequent flyer programme will adopt the IAG “Avios” currency which means that members will be able to move Avios between different IAG frequent flyer programmes.  The “Gold Circle” programme is relatively limited in terms of partnerships whereby miles can be earned through spend with third parties and through co-branded credit cards so we expect a lot of activity in this area.

3. What we also expect to happen

a) We expect Aer Lingus will codeshare on BA’s long-haul routes from London Heathrow to Africa, the Middle East and Asia Pacific and Iberia’s long-haul routes from Madrid to Latin America.

4. What we don’t know will happen

a) Aer Lingus currently has codeshare relationships with JetBlue, Etihad Airways, United Airlines, Virgin Atlantic and KLM. IAG has indicated that some of these may continue. However, it is a reasonable assumption that many of these may be discontinued.

b) We don’t know whether other Oneworld airlines will increase flights to Dublin. American Airlines currently flies to Dublin from Philadelphia and New York JFK (year round) and Chicago and Charlotte (summer seasonal).

c) We don’t know whether there will be a consolidation of the Aer Lingus and British Airways schedules on overlapping routes to Belfast and Dublin. 

There is precedent from the merger between BA and Iberia for a route to be shared between the airlines with scheduling timed to maximise efficiency by eliminating “night stops” where aircraft and crews stay away from their home base overnight (thus reducing aircraft utilisation). This is the case for London Heathrow – Madrid.

c) We don’t know what other network growth there will be for Aer Lingus. IAG CEO Willie Walsh has indicated that routes to Asia may be a possibility but we expect these to be a long way off, not least when connections are available at London Heathrow.

d) We don’t know to what extent there will be product alignment between Aer Lingus and other IAG member airlines. For example, BA offers a business class cabin and complimentary food and drink in economy on London Heathrow – Dublin, but Aer Lingus doesn’t. There is precedence for IAG maintaining such differentials, but if IAG wants to capture connecting traffic from Ireland to its long-haul network, it would be disadvantaged if Aer Lingus didn’t offer business class to London Heathrow.

We welcome any thoughts and comments below:

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