Aer Lingus A330-200
Aer Lingus has defined what now looks like the final version of its long-haul fleet strategy. The airline plans to take delivery of a mix of Airbus A350-900s and -900 regionals between 2018 and 2020, which represents a delay of up to three years compared to earlier scenarios.
The carrier’s widebody planning has undergone several iterations. At some stage, Aer Lingus had ordered a mix of A330s and A350s before switching to the new model entirely.
In an earlier agreement, Aer Lingus and Airbus had settled on initial A350 deliveries in 2015. But CEO Christoph Mueller said the two sides have spent months to negotiate a new schedule, which now sees the first aircraft arriving three years later. The airline’s order is for nine A350-900s.
Mueller did not elaborate on why the changes were made. However, Airbus is keen to accommodate the needs of larger customers as soon as possible, whereas Aer Lingus has a relatively young fleet of A330s. Mueller has also said in the past that the A350 range capabilities are more than what the airline needs, therefore the interest in at least an A350 regional subfleet. Most of its North American destinations are on the East Coast, but the airline is adding new services to Toronto and San Francisco in the summer.
The airline has significantly grown capacity last year on long-haul services (11.6%) while reducing short-haul services 4.6%. The increase was mainly due to the integration of one additional A330 previously used on a wet-leased contract for United Airlines (Washington-Madrid). As Aer Lingus was successful in selling the additional seats, long-haul capacity is going to be up a further 20% in 2014 as a result of the introduction of three Boeing 757s on lease from ASL Aviation. Two of the aircraft are based in Shannon for services to Boston and New York.
Mueller said the arrangement will likely be continued until it can figure out how the 757s could be replaced by a more modern aircraft. Aer Lingus has been looking at operating the Airbus A321neo on transatlantic routes, but is still not yet convinced the type is operationally capable of the required missions.
Aer Lingus last year posted a €61.1 million ($83.9 million) operating profit, in line with its latest guidance, but lower than the €69.1 million achieved a year earlier. The lower-than-hoped-for result is mainly due to the competitive pressures in the short-haul arena where its main competitor Ryanair has been pricing even more aggressively than usual. Revenues were up 2.3% to €1.43 billion.
To counter the trend toward lower operating margins, Mueller is launching the “Cost Optimization and Revenue Excellence (CORE)” program, which aims to cut costs €30 million within the next two years. As part of core, the airline plans to reduce overhead headcount and wants to negotiate more flexible labor deals to take into account the seasonality of its business. On the revenue and product side, Aer Lingus will introduce lie-flat seats in its long-haul business class next winter and Wi-Fi access on short-haul flights.
All of its US flights are to be pre-cleared in Dublin—the aircraft are therefore parked at domestic US terminals and baggage is automatically transferred to connecting flights with no need to pick it up. Aer Lingus also plans to relaunch its website.
Mueller said any moves in terms of mergers and acquisitions are likely held up by the uncertainty surrounding the stakes of Ryanair and the Irish government. Ryanair has launched an appeal against a decision by the UK competition authorities to require it to reduce its shareholding from 29.8% to 5%. The Irish government also has a 25% stake in the airline. The government has stated it wants to sell in principle, but left open when and how it might do so.