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George Santayana, wrote "those who cannot remember the past are condemned to repeat it” and in the airline industry mistakes made in the past are often repeated and more usually with the same result. A recent edition of Phoenix magazine (12th-25th August) has a commentary critical of the current Aer Lingus management and some of the decisions made. Unfortunately the article confused many of the decisions made by Christoph Mueller with those of his predecessor Dermot Mannion before going on to make the suggestion that Aer Lingus should buy the Stelios holding in easyJet!  However, under the leadership of Christoph Mueller Aer Lingus has not only found a niche for itself but has managed to avoid going under. Three key things have always affected the viability of Aer Lingus, its fleet, it route network and its cost base.

The fleet

Aer Lingus like a number of carriers has realised that the ‘one size fits all’ adopted by the low cost carriers may not be the best model for the airline and like other carriers it has realised the value of premium passengers and the need to match frequency and service to meet their needs. Interestingly the ex Iberia A319s being acquired by Aer Lingus are reportedly being retained in their existing configuration with 122 seats, (44 business and 78 economy) heralding perhaps a return by Aer Lingus to business class (dropped by Willie Walsh), at least on selected routes. In another significant move away from a single type is the use by Aer Lingus of turboprop aircraft through its franchise agreement with Aer Arann, an idea first adopted with Aer Lingus Commuter in 1984. The present Aer Lingus Regional operations commenced on the 28th of March 2010, using a fleet of five ATR72s, from bases in Cork, Dublin and Shannon. On long haul, capacity has been trimmed back and Mannion’s order in June 2007 for six of the new Airbus A350 XWB as well as six A330-300E aircraft has been rescheduled. At the time Mannion linked the funding of new long haul aircraft with the privatisation of the airline. Three of the A330s have been delivered and the other three converted to A350s. Aer Lingus therefore has nine A350s on order, four to be delivered in 2015, two in 2016 and three in 2018 or later. Recently Mr. Mueller said that he considered the A350 over-specified for Aer Lingus long-haul routes which are in the (relatively short) 7-8 hour flight time range. He added that Aer Lingus would "stay with the A350 order but we cannot say if (the airline's future fleet) will be an (all-A350) long-haul fleet or a mix with A330s". If that’s the case it is likely that some of the A350s will not be delivered or perhaps some disposed off. With Aer Lingus passenger numbers in 2010 (9.34 million) on a par with 2007 levels (9.30 million) it is essential that the fleet reflects the capacity requirements of the airline particularly as in the intervening years (2008/9) Aer Lingus lost over €250 million. Most recent traffic figures for July show the total number of booked passengers including Aer Lingus Regional operations stood at 1,105,000, an increase of 3.0% compared to the previous July. Short-haul passenger numbers rose by 1.1% to 931,000, while its long-haul numbers fell by 3% to 96,000. Passenger numbers booked on Aer Lingus Regional flight’s increased 47.2% to 78,000 while overall load factor decreased by 1.1% to 84.7%.

The route network

Aer Lingus has a short-haul European network with over 60 destinations, although some of these are offered only on a seasonal basis. There are also five long-haul destinations served in the United States. Non performing routes have been dropped or trimmed back and the expansion at Belfast and Gatwick has been reversed. Aer Lingus has also resisted returning to the west coast of the United States in spite of a campaign launched by a lobby group established by John Hartnett, President and Founder of the Irish Technology Leaders Group (ITLG), which began last October. With the Transatlantic market suffering overcapacity and with a number of other carriers already announcing plans to reduce capacity, Aer Lingus informed the Government and other “interested parties” that it would not be re-launching a route to the west coast of the US in 2012 and told them that such a route would be loss-making in the current economic and fuel price climate. In addition Aer Lingus has confirmed that it will not operate Dublin-Agadir or Shannon-Paris this winter and that Dublin-Edinburgh will be operated entirely by Aer Lingus Regional (Aer Arann). Aer Lingus is also re-entering the IT market, which it exited 10 years ago, with three flights this winter, from Cork to Salzburg and Dublin to Salzburg and Toulouse on behalf of Direct Ski and Topflight. While the charter business to sun destinations in Spain and the Mediterranean has been largely decimated by low cost carriers there appears to be a number of niche marker where IT charters might be viable.

Restoring viability

Aer Lingus is currently engaged in a strategic review of key issues, firstly the evaluation of Project Greenfield, to see if it will be necessary to further reduce unit costs beyond those in the current Greenfield, secondly high on the agenda is whether to join one of the three Global Alliances as opposed to developing its current partnerships. Aer Lingus had been a Oneworld member from 2000 to April 2007, before leaving as part of its repositioning as a low-fares carrier. Recently Mr. Mueller said: "We are too small to become religious on alliances. We really have to extract money from an alliance. We are currently evaluating whether the benefit of joining one of the three alliances is larger than the costs associated with joining one of the alliances". North Atlantic joint ventures can be more important than an alliance as they operate like a single entity which is another factor to consider. "There will certainly be a move in one or other direction by Aer Lingus in the foreseeable future," he added. Another key factor has been the build up of transfer traffic. Transatlantic traffic alone grew 23% to more than a third last year, and transfer passengers have been facilitated by the move into Terminal 2 at Dublin which offers US customs clearance.

Other moves

Aer Lingus has also made a number of moves to improve its skills base. The closure of SR Technics Ireland Ltd. in 2009 allowed Aer Lingus to resume the line maintenance operations outsourced to SR Technics through a new company Aer Lingus Ireland Ltd. This has allowed Aer Lingus Ireland Ltd. to become involved in third party business and there are reports that Aer Lingus is considering re-entering the third party handling business. Aer Lingus had developed strong competencies over the years through its Maintenance and Engineering division and this had been lost to outsourcing which was fashionable among Mr. Mueller’s predecessors. In April, Aer Lingus launched a new Apprentice Aircraft Maintenance Engineers scheme to commence in the Autumn. For the first time in over 20 years, Aer Lingus will train its own apprentices who will be based in Dublin and Shannon. On 31st July Aer Lingus advertised for a new Cadet Pilot Training Programme due to commence between late 2011 and early 2012. Ab initio training will be provided to successful candidates ultimately qualifying them as co-pilots on the Airbus A320 fleet. The programme which is being part funded by Aer Lingus will take 14 months to complete and consists of a number of phases combining classroom and simulator based training. More than 1,000 people have applied for the 20 cadet positions which will cost a total of about €100,000 to complete. Mr. Mueller has given a clear indication that Aer Lingus is building a skills base for the future, in line with government policy of developing a knowledge based economy. Speaking at the Engineers Ireland Annual Conference 2011, Mr. Mueller qualified this by saying “if we rely on just being the brain and outsource the muscle then we will be just be a bodiless corpse”. This is why he is restoring mechanical skills but also to deal somewhat with the mass unemployment in the economy. He added “at 14.7%.... I believe that that level of unemployment is unsustainable not only for an economy but more important for the society”. If only others could come to the same conclusion.