Intensive discussions between senior Aer Lingus executives and representatives from at least two airlines are taking place over the weekend as the airline tries to firm up a strategic alliance. It is understood the focus has narrowed to British Airways/American Airlines and the Delta grouping. A report on a preferred alliance should be ready for the Aer Lingus board meeting next Thursday. The report will then be given to the Minister for Public Enterprise, Ms O'Rourke, who yesterday appointed Salamon Smith Barney to examine the findings on her behalf.
It is understood that although one or two airlines have expressed an interest in taking a shareholding in Aer Lingus, such a shareholding will be small, if at all.
However, concluding a deal to become part of an alliance - there are four major groupings in the airline business - will clear the way for a public share offering to raise much needed cash for future investment - around £380 million by 2002.
Aer Lingus wants a strong partner to complement its transatlantic routes which are very lucrative. It wants to be able to offer customers destinations beyond New York, Chicago, Boston and Los Angeles, and to take traffic on to the translatlantic route from destinations elsewhere in North America.
The Oneworld alliance includes British Airways, American Airlines, Finnair and Iberia. It has been tipped as the obvious choice for Aer Lingus - especially as around one-third of Aer Lingus passengers feed on to other routes from Heathrow airport. British Airways currently feeds its traffic to Ireland via Aer Lingus and British Midland.
"I believe Aer Lingus will pretend to be talking to other people, but it will go for the BA/American Airlines option because it will be afraid of irritating BA which can be a fierce competitor if it opts for somebody else," said one industry observer.
US airline Delta, part of the Altantic Excellence alliance, which includes Swissair and Sabena, has long connections with Aer Lingus and has operated code-sharing from New York, buying seats from Aer Lingus.
Aer Lingus was taken by surprise when Delta said it was launching a service from New York to Dublin from July. However, this is not thought to be an obstacle to talks, although it caused strain initially.
Delta has strong operations both within North America and from North America to Europe. Regardless of which alliance Aer Lingus opts for, it will irritate someone. At present, it routes a lot of traffic through KLM in Amsterdam. KLM is part of the Wings alliance which includes Continental and Northwest Airlines. It is understood that this alliance is not being considered at this stage.
Aer Lingus also has strong links with Lufthansa, which is in the STAR alliance, along with United Airlines and SAS. Aer Lingus chief executive, Mr Garry Cullen, knows Lufthansa well from his time in charge of cargo and ground handling operations. Lufthansa has expressed a keen interest in forming an alliance with Aer Lingus, but is understood to be out of the running.
However, it is thought that Aer Lingus is discussing the possibility of selling its ground handling operations at Heathrow Airport to Lufthansa.
Once Ms O'Rourke receives the report, she will pass it to the consultants who will spend about one month evaluating it.
