Aer Lingus dancing a financial jig


After spurning merger buyout twice from Ryanair, the powers that be at Aer Lingus are moving deck chairs on a sinking ship and looking at novel ways to make money. Piecing together several news stories uncovers a desperate story.

A bit of history: Aer Lingus has twice rejected overtures from Ryanair to take over the struggling carrier. The first was in the range of €1.5 billion. The second was around €750 million.

Now, according to news reports and stock market action, the term struggling has changed to sinking.

Shares in Aer Lingus fell 20 percent, making it the biggest loser on the Irish stock index, after the company forecast losses this year would be materially worse than the EUR79 million euro bottom range of market expectation.

The loss-making airline, whose chief executive resigned earlier this month saying a new person would bring fresh ideas, said it was reviewing a range of options, including its long-haul capacity, to reduce operating costs.

In the midst of the corporate implosion, one CEO left the company shortly after rejecting the Ryanair bid and the freshly appointed CEO left Aer Lingus just this week. A new captain has taken the helm.

The airline claims that all is not lost. And they are certainly making some dramatic moves to try and increase traffic. Aer Lingus has entered into a novel scheme with United Airlines to run flights between Dulles Airport in Washington DC and Madrid. Aer Lingus will provide the planes and United the marketing muscle.

The new arrangement is creating all sorts of problems for airline regulators and unions since it is the first instance where an entity of a national airline is flying between two countries where it is not based. Labor laws and national airline regulations are falling into a gray area.

Another gutsy move is the build-up of a new base in Britain at Gatwick Airport just outside of London. As other airlines have been consolidating their operations at Heathrow, Aer Lingus has been ramping up operations at Gatwick. This gives the Irish airlines a far larger marketing base and a far more enticing destination that simply the Emerald Island.

Time will tell. Ryanair has ruled out another bid for Aer Lingus and the Irish national carrier continues to talk trash about its low-cost rival. They claim, “Our promise of a ‘cheap and cheerful’ not ‘cheap and nasty’ experience is obviously appealing to the masses.

In the meantime, desperate times are only getting more worrisome as passenger traffic lags, profits fall and the stock price tumbles.

  • Paul O’Carr

    Charlie, you believe too much of the Ryanair propaganda.

    Yes, Aer Lingus posted a loss for 2008, and is forecast to post a loss in 2009 also. Then again, which airline hasn’t? However, unlike many, Aer Lingus posted healthy results in recent years, including a profit of €105.3million in 2007, a loss of €69.9m in 2006 (because of a restructuring charge of €133m to reduce long-term costs), and a profit of €88.9m in 2005. Hardly a “desperate story” as you describe it.

    Aer Lingus has very successfully turned itself around, moving from being a full-service airline to a low-cost operator. It is still the favoured option for most Irish people, as it offers much friendlier service than Ryanair, and more flexibility when things go wrong. Many people, myself included, would never choose to fly “cheap and nasty” Ryanair where an alternative low-cost provider services the same route. Aer Lingus happens to be one of the best of the rest, in my humble opinion.

    And Aer Lingus has not lost two CEOs in the past year, as you suggest. Willie Walsh left Aer Lingus in January 2005, shortly before he was offered the job as CEO of British Airways, and his successor Dermot Mannion resigned on 6 April 2009.