30-Second Interview – Aer Lingus Chief Commercial Officer, Stephen Kavanagh
“We’ll be looking at Florida and possibly another gateway on the east coast”
anna.aero: So it’s all good news at Aer Lingus – good finances – good growth – you’ve warned us traffic will be down a bit in the loss-making Q1, but you also have an additional 20% long-haul seat capacity in 2014 – and seven new destinations…what other route developments can we look forward to?
Stephen Kavanagh: We will continue to make some very significant advances in 2014-15. Transatlantic is still the opportunity and our new capacity is being very well absorbed. For 2015 we’ll be looking at the Florida area and possibly another gateway on the east coast.
aa: Aer Lingus has nine A350-900s arriving between 2018-2020. What will you do with all these planes?
SK: The -900s will replace the seven A330s, including some lower capacity -200s which are now too small, and the -900 Regionals will be used for east coast operations. We have started using leased 757s as pathfinders – a tool to see if the A330 can be put on, but not just as a bridging solution – the 757s are the only current solution for 170-200 seat demand in our network. In the next 18 months we are looking to issue an RFP for up to 40 short-haul aircraft which will also serve as the 757 replacements, and growth. We have also evaluated transatlantic-capable A321neos, but also possibly 737s.
aa: So this growth – is there much in the short-haul sector too?
SK: We maintain the integrity of the network with the short-haul feed with our Aer Lingus Regional partners. This generates lots of one-stop connecting opportunities for 60-70 cities ex-Europe in which Dublin has a significant advantage of geography and a lack of congestion over Heathrow and Amsterdam, not to mention the unique pre-clearance product. There’s a lot of people in Europe not connected to North America, but for us the opportunities for short-haul growth lie in improving load factors without necessarily needing more routes and new aircraft – we have average loads of around 75% on the short-haul network, I want to get an eight in front of this number.
aa: So no bases like you tried in Belfast and London Gatwick?
SK: Belfast worked well for us – particularly the summer routes, but Gatwick was an implementation failure in terms of pricing and marketing. It’s a case of what might have been, I don’t think we’ll be trying anything similar in the near term.
aa: OK – so you need the feed over Dublin. Does Terminal 2 work well for you?
SK: Terminal 2 was not specifically developed as a connecting terminal, but working with DAA, we are finding it fit for purpose, especially this year which is the first season we can market pre-clearance comprehensively across all US flights. And the attractions are not just price sensitive – our move into the JFK domestic terminal and the arrangements with JetBlue offer MCTs of just 45 minutes.
aa: So what about alliance membership? You pulled out of oneworld because you went ‘low-cost’. Now you have a regional feeder network, a European short-haul operation, and growing long-haul routes… just like airberlin, on a slightly different scale, who joined oneworld not that long ago…
SK: Since we pulled out of oneworld the alliance landscape has changed and for us it’s all about joint ventures – oneworld’s British Airways is still very important at Heathrow, but Star Alliance United at Chicago replaced American Airlines, and we’re now working with JetBlue at JFK, and non-aligned Etihad at Abu Dhabi to access Asia. We could one-day re-visit our alliance strategy, but for the time being we have found that a bilateral and open architecture works best for us.
aa: And will you also ever ‘revisit’ the Far East?
SK: Let me just say that we are cognisant of the competition from the Middle East and there doesn’t look like too many opportunities on our own – we have our code-share and shareholding with Etihad, and we’ll work to get the network benefits with that.
aa: After your last good financial results your CEO hinted that you might use the €420m of net cash to pursue merger and acquisition. Have you got any hint of what sort of airlines would be of interest? Low cost? Regional? Legacy? South or east Europe? What sort of thing would fit?
SK: Well we’re open to any investment opportunities that improve our return on capital…
Aer Lingus new routes March/April 2014
Dublin to Hannover and Pula
Shannon to Malaga and Bristol*
Cork to Newcastle*
Dublin to San Francisco and Toronto
*Operated by Aer Lingus Regional