http://www.bloomberg.com/apps/news?pid=20601102&sid=anK5ju0N1WpMBy Steven Rothwell and Louisa Fahy
Jan. 26 (Bloomberg) -- Aer Lingus Group Plc will stop trying to undercut larger Irish rival Ryanair Holdings Plc and offer enhancements including better food and faster check-in times to customers willing to pay more.
In a switch that brings it closer to EasyJet Plc, which attracts a higher proportion of business flyers, Dublin-based Aer Lingus will adopt a hybrid model somewhere between a discount and full-service carrier, new Chief Executive Officer Christoph Mueller said today at an investor briefing in London.
Aer Lingus will also add more short-haul routes through a franchise deal with smaller Irish carrier Aer Arann, while seeking to boost long-haul connections by increasing the number of code-share partners. Mueller, who became CEO in September, said a review of the company had led him to conclude that the low-cost model was limiting its ability to maximize revenue.
“They’re setting out their stall by offering something different to Ryanair,” said Joe Gill, an analyst at Bloxham Stockbrokers in Dublin. “You could describe it as an EasyJet model for Ireland. That’s going to be very challenging as the evidence suggests short-haul is a pretty commoditized product.”
Aer Lingus rose as much as 2.9 percent to 70 cents and was trading at 69.5 cents as of 11:03 a.m. in Dublin. The stock has advanced 8.6 percent this year.
“The customer will decide where to position Aer Lingus on a particular flight,” Mueller told investors. “We offer the basics of transportation then we add what is needed, as opposed to a full-service carrier, where the extras are hard-wired.”
New Routes
The agreement with Aer Arann will cover 12 routes, giving Aer Lingus new services to Bristol, Blackpool, Cardiff, Durham and Doncaster/Sheffield in England, together with Glasgow and Edinburgh in Scotland. While the flights will use Aer Arann ATR 72 turboprop planes, they’ll be branded “Aer Lingus Regional,” with tickets sold through the larger carrier’s Web site.
Luton, England-based EasyJet attracts more time-sensitive flyers than Ryanair by operating to airports that are generally closer to major cities than those used by its rival.
Aer Lingus is already reducing wages and slashing its workforce by almost a fifth, and more jobs may have to go as the airline braces for a decline in sales in what will be an “extremely challenging” year, Mueller said.
Airlines probably lost $11 billion in 2009, according to estimates from the International Air Transport Association. Aer Lingus, targeted by Ryanair in two takeover bids, has been hit harder than most as the Irish economy struggles to emerge from the worst recession since World War II.
“The Irish market is just a basket case,” Mueller said. “We do expect the recession in Ireland to last longer than in the rest of the world.”
To contact the reporters on this story: Steven Rothwell in London at srothwell@bloomberg.net; Louisa Fahy at lnesbitt@bloomberg.net
