Aer Lingus’ brave new Oneworld

By Ray O’Hanlon

Aer Lingus is on course for an alliance with American Airlines after its board last week recommended to the Irish government that it should join the Oneworld alliance headed by American and British Airways.

The decision by Aer Lingus planners ended months of speculation and a final round of guessing in which the choice for the Irish carrier seemed to rest between Oneworld and another group of airlines led by Atlanta-based Delta Airlines.

The choice of Oneworld will now be studied by financial auditors at Salomon Smith Barney before it comes back to the Irish government for final approval. The government is a 95 percent shareholder in Aer Lingus.

Once approval is presumably given, it will be up to American and the other Oneworld members to accept the Aer Lingus application. Rejection of the Aer Lingus overture is, however, considered unlikely.

An American Airlines spokesman told the Echo that American was pleased that Aer Lingus had expressed its interest in joining Oneworld.

However, the spokesman did say that the various Oneworld members had to reach agreement on the Aer Lingus application. "There will be a lot of negotiating ahead," he said.

In addition to American and British Airways, Oneworld also includes Canadian Airlines, Qantas and Cathay Pacific. Finnair and Spain’s Iberia are currently in line to join.

The Aer Lingus executive vice president for North America, Jack Foley, described the Aer Lingus bid for Oneworld membership as exciting news.

"This is an important part of our strategy to continue growing in North America," Foley said.

He said that to remain outside the alliance would have resulted in Aer Lingus "competing on the Atlantic with both hands tied behind our back."

Foley stressed that even after membership of the alliance, Aer Lingus planes would continue to fly the airline’s present routes and that ground services at U.S. airports would still be provided by the Irish carrier.

For the Aer Lingus customer, the alliance will most obviously result in a merging of the Aer Lingus frequent flyer program with the American equivalent and links between Aer Lingus and American’s domestic network in the U.S.

That network is considerable. American Airlines, which trades on the stock exchange under the title AMR Corporation, is presently the second-largest U.S. carrier, behind United Airlines.

American has 659 aircraft serving 160 cities in the U.S. and around the world. The carrier’s commuter arm, American Eagle, has 215 aircraft serving 130 cities. The combined total of cities served by the two (excluding duplicates) is 234.

Through an alliance with American, Aer Lingus will effectively reach into the four corners of the U.S. market in search of passengers wanting to fly to Ireland.

In turn, Aer Lingus will be able to feed passengers from Ireland into the American system once they arrive at Aer Lingus destinations in the U.S. Those arrival points are New York’s Kennedy, Newark in New Jersey, Boston’s Logan Airport, Chicago’s O’Hare and, from later this month, Los Angeles.

Aer Lingus is expecting the Salomon Smith Barney report on its Oneworld plan to be ready in about four to six weeks. Reports, meanwhile, indicate the possibility that Aer Lingus will be put on the block in a public flotation before next year is out.

"The government intends to privatize Aer Lingus through a £500 million stock market flotation within the next 18 months," the Sunday Business Post in Dublin reported, citing "a senior government source."

The current Irish government ownership of 95 percent equity is rounded off by 5 percent in the hands of Aer Lingus staff.

There has been speculation that British airways might opt to buy 10 percent of Aer Lingus with American Airlines opting for an additional 10 percent.

Whatever about offering shares to the public, some reports suggest that the prospect of airline giants such as American and British having a role in the running of Aer Lingus could cause concerns, particularly among unionized Aer Lingus staff and in some Irish political circles.

Meanwhile, the Aer Lingus choice of Oneworld is certain to lead to one thing and that is the winding down over the coming months of the existing passenger-sharing arrangement with Delta.

Delta, the present third-largest U.S. carrier behind United and American, is gearing up to go head-to-head with Aer Lingus out of Kennedy Airport this summer. The Aer Lingus decision to opt for American will only sharpen the emerging competition between the two.

Against this backdrop, American Airlines itself can retain the option of flying to Ireland should it seek to open a route of its own. However, in the context of the Oneworld alliance, such a move would be confined to a U.S. airport, or airports, not already served by Aer Lingus.

American is based in Forth Worth, Texas, where the senior staff list includes a fair number of Irish names, not least American’s chairman, president and chief executive officer, Donald J. Carty.