Aer Lingus avails of Open Skies to launch new routes

Aer Lingus wasted no time in launching new routes to the United States following the decision by EU transport ministers to liberalise the transatlantic market for air travel.

Open Skies does not take flight until March 30th, 2008 but a deal struck between the US and Ireland means that three new routes have been opened to allcomers straight away.

As a result, Aer Lingus will begin services to Washington DC, Orlando and San Francisco in September and October.

Aer Lingus takes delivery in May and June of two new A330 aircraft that will service these routes. On a full-year basis, analysts estimate that the routes could boosts its revenues by more than €200 million.

Open Skies represents a great opportunity for Aer Lingus. It is estimated that 100,000 people travel each year from Ireland to the west coast of the US via London, Amsterdam or Paris.

This is traffic that Aer Lingus now hopes to tap. According to the Department of Transport, 22 US cities have expressed an interest in starting direct flights to Ireland.

The Irish Hotels' Federation said Open Skies could see an additional one million Americans visit Ireland over the next seven years, giving a €1 billion boost to the economy here.

"This is good for us, there's no doubt," said Enda Corneille, Aer Lingus's commercial director. "It was the news we'd wanted for a some time."

Mr Corneille said Aer Lingus was currently recruiting about 400 cabin crew and pilots to staff these new services.

It also validates the decision to go ahead with the initial public offering of shares in Aer Lingus late last year, which gave the airline €400 million in extra cash to buy new long-haul aircraft and secure its future viability.

"This puts a lot of visibility on their long-haul growth ambitions," said one Dublin-based airline analyst.

It might also strengthen chief executive Dermot Mannion's hand as he seeks to fend off Ryanair's bid for Aer Lingus. "This increases the pressure on Michael O'Leary to raise his offer," said an Irish fund manager.

By the same token, Open Skies could be the catalyst for a raft of consolidation among European airlines, given that national ownership restrictions are being relaxed.

Analysts predicted that British Airways and Lufthansa would probably lead this consolidation, with Aer Lingus a prime target, given that it owns 23 slot pairs at Heathrow and has a 48 per cent share of transatlantic traffic between Ireland and the US. The Heathrow slots are valued at €5 million-€10 million apiece, although they cannot be sold without the Government's approval, a move that seems highly unlikely.

Aer Lingus won't be the only airline to launch new transatlantic routes. American, Delta, Continental and US Airways already operate services here and are expected to launch more once the Shannon stopover is scrapped in 12 months' time. Northwest and United are also expected to look at flying in to Dublin.

While Aer Lingus is an obvious winner from Open Skies, Shannon could be the biggest loser. Ironically, Aer Lingus's first transatlantic flight took off from Shannon on April 28th, 1958, on its way to New York.

The airline currently flies about 400,000 passengers between Shannon and the US annually and said it would not abandon the west of Ireland airport. "There continues to be a market from Shannon to New York and Boston, particularly at peak summer time," said Mr Corneille.

Minister for Transport Martin Cullen said Open Skies represented an excellent opportunity for growth at Shannon, while acknowledging that Dublin would be the biggest winner. "This has to be positive for Shannon," the Minister said. "There just have to be huge opportunities given the size and scale of the US market." He also highlighted the fact that Shannon would shortly have full customs facilities available for those travelling to the US.