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Delta’s Atlantic move may be alliance ploy

February 16, 2011

By Staff Reporter

By Ray O’Hanlon and Andrew Bushe

DUBLIN — Delta Airlines is poised to compete nose-to-tail with Aer Lingus out of New York this summer.

But is the apparent raising of the competition stakes over the Atlantic merely a prelude to a grand alliance between Delta and the Irish carrier?

That is indeed a possibly outcome, according to one report.

Aer Lingus was not the only part of the travel business to be jolted last week when Delta announced that it would add a New York service to Ireland in mid-July. The carrier already operates to Ireland out of Atlanta.

According to a report in the Sunday Business Post, the Delta move could in fact be a tactic to lure Aer Lingus into a strategic alliance.

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The two airlines have been operating a code sharing agreement in recent years. Aer Lingus flights out of New York to Ireland carry passengers who have first been flown to Kennedy Airport by Delta from other U.S. cities. The code-sharing agreement is due to expire at the end of March.

Aer Lingus and Delta are also linked through their respective frequent-flier programs, TAB and Mileage Plus, respectively.

Aer Lingus is now reviewing the code-sharing agreement in particular. The mileage relationship is expected to remain in place for the foreseeable future. If, however, Aer Lingus moves to scrap the code-sharing deal in advance of its March expiration date, that would indicate that relations between Delta and Aer Lingus have soured. Keeping it in place might indicate the continued possibility of an alliance.

The Dublin-published Business Post, referring to "sources close to Aer Lingus management," reported that Delta’s decision to begin flights to Dublin and Shannon from New York in mid-July "could indicate interest in examining a strategic alliance" with Aer Lingus.

The Irish carrier has been exploring the alliance concept for some time. A partnership arrangement with a large airline, or an existing alliance of other airlines, is considered crucial for the Irish carrier’s future and financial well being.

However, the Business Post story, citing "aviation industry sources," also pointed to a possible Aer Lingus/British Airways alliance as being the more likely way forward right now. And an Aer Lingus spokesman in New York poured cold water on the suggestion that Delta’s New York move is merely an attempt to spur on talks aimed at forming an alliance with Aer Lingus.

"That’s not the way we’re reading it," said Brian Murphy, Aer Lingus vice president for sales and marketing in the U.S.

Meanwhile, Delta’s decision to operate four flights a week from Kennedy to Dublin and three to Shannon from July 15 follows an increase of about 20 percent in transAtlantic passenger traffic into Ireland last year.

Until now, Aer Lingus has had a monopoly on the JFK-Dublin route. Another U.S. carrier, Continental, is already in competition with Aer Lingus on the Newark-Dublin route.

"This is a further indication of what we anticipated and that was competition as we gained success. We’re definitely not surprised," Murphy told the Echo.

Delta, meanwhile, said Ireland was top of its agenda for expansion in Europe — a statement that does appear to lend weight to the suggestion that the carrier might be competing with Aer Lingus in order to ultimately force a marriage.

Joanne Richardson, general manager of Delta (Ireland), said Delta had been in the Irish market for 14 years . She said the expansion decision effectively increased Delta’s Ireland capacity by 100 percent to 250,000 seats. The competition would benefit the consumer, she said.

As for the code-sharing deal with Aer Lingus, Delta said it has similar relationships with about 15 other airlines worldwide and in some cases also competes with the airlines on the same routes.

Aer Lingus, meanwhile, has also announced an expansion of its own transAtlantic services this year. There will be a 14 percent increase in capacity — up to 1.2 million seats — with eight extra flights a week from the U.S., bringing the total to 46.

This will include the already announced Aer Lingus service out of Los Angeles. In addition to New York, L.A. and Newark, Aer Lingus also operates out of Boston and Chicago.

Only six years ago, Aer Lingus operated just 15 flights weekly on the transAtlantic route. Group chief executive Garry Cullen said that over 70 percent more passengers had been carried on the transAtlantic route last year compared to 1993.

The increased competition over the Atlantic will, however, be more to do with choice between carriers, their schedules and respective styles, as the peak season fares offered by Aer Lingus, Delta and Continental are expected to be much the same.

Meanwhile, Shannon Airport has announced that last year was its best ever for passengers and cargo. Cargo was up 21 percent and passenger numbers, at 1.84 million, were up 18,000 on 1977.

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