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IAG/Aer Lingus

Old 19th Dec 2014, 08:15
  #21 (permalink)  
 
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If (and it would seem unlikely) IAG were to be able to acquire Aer lingus, and retain all those LHR slots, then I guess is they'd slim down the Dublin transatlantic operation, and use the newly acquired LHR slots to add yet more capacity to the London / USA routes. I can also see BA using EI as a feeder operation to their LHR hub mainly, and cutting down massively on direct DUB - mainland Europe destinations, treating Dublin as it does Manchester, Glasgow and Edinburgh.
While I suspect you are right, let me present an alternative business model.

BA currently operate a lot of flights between the UK regions and Heathrow, particularly Edinburgh/Glasgow. Most of these passengers are connecting on to long haul flights, with US destinations being amongst the most popular.

With the acquisition of EI, they would gain an additional hub in Dublin, which is ideally located as a transatlantic hub. With the ability to pre-clear customs and immigration in Dublin, it becomes an attractive alternative hub for regional passengers. If enough can be tempted to connect through Dublin, then they can reduce frequency on regional flights, freeing up slots for more long haul.

The same approach would also work for European destinations - why fly France-LHR-US, when you can instead route through Dublin and pre-clear? This would free up yet more slots for longhaul at LHR.

With the saga over the 3rd runway at LHR continuing to drag on, BA needs a backup plan for expansion. This could be perfect.
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Old 19th Dec 2014, 09:26
  #22 (permalink)  
 
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Reading through this thread, there appears to be fundamental misunderstanding of how elements of the aviation industry work.

EI do no own the hub in Dublin. IAG, nor any other airline don't need to purchase EI in order to operate a T/A hub through Dublin or Shannon, they can just simply go and negotiate rates with either the DAA or SAA, hire some staff (or outsource) then base a few widebodies at either airport, set up some low cost feeds and away you go.

It would seem that buying & integrating an existing legacy operator would the more difficult and expensive way of doing it.

That said some reports this morning are suggesting that the IAG bid valued EI at €1bn, which given that the company's gross cash position (the amount of cash they hold before deducting any debts) is over €900mn makes the valuation extremely low and, IIRC not too far off the old FR bid of some time ago.

JAS
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Old 19th Dec 2014, 09:42
  #23 (permalink)  
 
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The last post misses the point a bit I think.

EI may not own the hub, but most of the pax using it are currently "theirs". It's these plus other opportunities IAG would want. They wouldn't want to set up shop in competition with EI- they would want to replace it and more.
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Old 19th Dec 2014, 15:57
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If I got the same Avios for flying NYC (EWR or JFK) to BRS via DUB, I'd do it in a heartbeat rather than fly into LHR. I'm surely not alone in that. The sooner EI are in IAG the better.
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Old 19th Dec 2014, 16:25
  #25 (permalink)  
 
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I presume there will be considerable consolidation on DUB LHR if IAG take EI. Could it also herald the arrival of KLM on DUB AMS?
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Old 19th Dec 2014, 17:32
  #26 (permalink)  
 
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Using EI flights with BA codes, BA could market British regional flights to the US via DUB without LHR transfers.
That repositions them as the British way to fly to the US (from BHX, MAN, BRS, EDI, LGW, BOH, JER, CWL, SEN, GLA, ABZ) with pre-clearance.
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Old 19th Dec 2014, 17:42
  #27 (permalink)  
 
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@22/04

yes, that's a valid point. Most of EI's TA traffic originates in Ireland with an increasing amount feeding in (both by EI Mainline and Regional). However, as the LoCo's have shown, pax loyalty only goes so far.

If you can offer a similar product (comfortable, punctual, friendly, safe) TA hubbing through a modern & not so busy airport with the added bonus of preclearance so you arrive in the US as a domestic, then brand A vs brand B becomes a pricing issue rather than loyalty or flag waving argument. If you can deliver a comparable product at a lower price than the incumbent then you'll take a fair chunk of 'their' customers (or so the theory goes).

The EI model does appear to be working, if someone wanted a piece of that action, what's their best way to attack the market? Purchase the incumbent (which grows your market share while taking out a competitor) or start from scratch with lower overheads?

Also, from the other side of the equation, if you're EI management, what does your best partner look like? A major European that's a rival as much as a partner or someone outside your geography? Alternatively, it's someone who wants to build the airline as a stand alone? All of which may be rendered moot if the share owners just want the cash.

IMHO and it is just my opinion, Aer Lingus gobbled up by International Consolidated Airlines Group would last not much longer than British Midland did when it was pulled into the fold (which is probably longer than EI would have lasted had FR gained ownership ... but again, that's all just my personal opinion).

JAS
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Old 19th Dec 2014, 19:16
  #28 (permalink)  
 
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If IAG does buy EI I think we can be confident that the EI will remain a separate airline.

IAG and WW have eyes wide open about the politics involved in the bid.
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Old 19th Dec 2014, 19:33
  #29 (permalink)  
 
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And I wonder when a certain Middle East airline that we cannot mention will wake up. Talk about being caught offguard. I think the UK competition commission appeal decision is due imminently which may force FR to sell down the majority of their shareholding. But the shares won't be going cheap now there are at least two potential bidders in the mix. Others may well be flushed out shortly.
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Old 19th Dec 2014, 19:46
  #30 (permalink)  
 
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When people speak of Aer Lingus having a long haul network benefiting from feed from the UK regions at the expense of BA, it's a long haul fleet I can count on two hands.
BA's long haul heavy fleet comes in at around 127. Versus ~ 8 at Aer Lingus. Worth remebering.

IAG want LHR slots for BA/IB/VY, flying low cost economy passengers on ATRs out of BRS to the US is not focus. Any strategic growth is constrained by a lack of capacity at DUB where preclearance at T2 has pain points.
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Old 19th Dec 2014, 20:19
  #31 (permalink)  
 
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The point still stands that BA are no longer the "national" airline for the UK
The point still stands that BA is a private company and has to turn a profit. The short-haul networks on BHX, GLA, MAN, etc.. fell victim to the no-frills operators. It was also more cost-effective for alliance partner airlines to do the trans-Atlantic routes and feed their hubs. Regretable agreed, but an unfortunate fact of life.

We have to forget about BA (and other national carriers) being publicly owned and government run, fares the same on all carriers and fixed by IATA, and no capacity crunch at LHR. Those days are long gone, and commercial realities are what matters.



They only connect to 6 .....from Heathrow !

Manchester, Leeds, Newcastle, Glasgow , Edinburgh and Aberdeen.

My point was very much about BA connectivity from the UK regions to Heathrow !
Point taken. It's 7 BTW, you forgot Belfast Harbour, plus 3 from LGW (EDI,GLA,JER) and 2 from LCY (EDI,GLA).

With the saga over the 3rd runway at LHR continuing to drag on, BA needs a backup plan for expansion. This could be perfect.
How true, but there's another dimension: if EI gets sold, it might as well be to IAG for all the reasons mentioned above PLUS the strategic one. That is to prevent another carrier buying it. Why is this critical? Because another carrier might asset-strip EI's LHR slots in the same way that BD's were by LH after 2009.

BA doesn't need EI's LHR slots, so no need for BA to "takeover" EI, but it does need to prevent EI's LHR slots going to a third party. Access to the growing Dublin TA business and pre-clearance is the icing on the cake.


Reading through this thread, there appears to be fundamental misunderstanding of how elements of the aviation industry work.
Not just this thread.


If you can offer a similar product (comfortable, punctual, friendly, safe) TA hubbing through a modern & not so busy airport with the added bonus of preclearance so you arrive in the US as a domestic, then brand A vs brand B becomes a pricing issue rather than loyalty or flag waving argument. If you can deliver a comparable product at a lower price than the incumbent then you'll take a fair chunk of 'their' customers (or so the theory goes).

The EI model does appear to be working, if someone wanted a piece of that action, what's their best way to attack the market? Purchase the incumbent (which grows your market share while taking out a competitor) or start from scratch with lower overheads?
IAG has to ensure that it's IAG that takes that action and no one else.

IMHO and it is just my opinion, Aer Lingus gobbled up by International Consolidated Airlines Group would last not much longer than British Midland did when it was pulled into the fold (which is probably longer than EI would have lasted had FR gained ownership ... but again, that's all just my personal opinion).
If IAG does buy EI I think we can be confident that the EI will remain a separate airline.
The EI brand is well-known in Ireland and the UK, there would be no point getting rid of it, in fact it would be counter-productive. "BA-Ireland" doesn't cut it. What happens in the back office is quite another matter. It was easier to do with BD because it was another UK airline.
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Old 19th Dec 2014, 22:35
  #32 (permalink)  
 
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This may appear to be an ignorant post, but why can't we pre-clear US arrivals in the UK like they do in Ireland? I assume we'd have to pay US immigration services to do this.
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Old 19th Dec 2014, 22:43
  #33 (permalink)  
 
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I'm sure the operators at any major European airport would kill for it, but there's a large amount of red tape and political complications. U.S. Pre clearance is technically U.S. soil, same as an embassy really. It's all sorted at government level. I have no idea why SNN and DUB are the only airports in Europe with it, but it's a dream come true for those 2 airports and the airlines/biz jets using it. Pretty handy from a pax standpoint too.
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Old 20th Dec 2014, 00:26
  #34 (permalink)  
 
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This may appear to be an ignorant post, but why can't we pre-clear US arrivals in the UK like they do in Ireland? I assume we'd have to pay US immigration services to do this.
Could be easily done at MAN especially if all USA-bound flights could be housed in one terminal, say MAN-2.

Could work at BHX, GLA, etc.. too for similar reasons.

At LHR it would be difficult, because there are USA departures from 5 terminals with too many to consolidate in one terminal (27 departures/day just to new York!). There could be issues if it was done for just one carrier or at just one terminal (e.g BA at LHR-5).

Also, HM Government would have to agree.

Who pays? Good question. Would imagine the carriers.

I have no idea why SNN and DUB are the only airports in Europe with it, but it's a dream come true for those 2 airports and the airlines/biz jets using it. Pretty handy from a pax standpoint too.
It's a good question why it's only Ireland in Europe, possibly because of the links between Ireland and the US, it's easy to arrange (in just one terminal at both DUB and SNN), and not too many flights (unlike LHR).

Other places with pre-clearance, AFAIK, are Canada, Bermuda, Bahamas and Cayman Islands.



Another thought: would EI move to LHR-5 if part of IAG, especially as gates 23/24 are now adapted for common travel area arrivals?
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Old 20th Dec 2014, 00:58
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If IAG bought EI, there's no point in both BA and EI doing DUB/LHR, because from a regulatory/competition point of view, they are the same company. Same with BHD. KLM would return to DUB and possibly ORK because that code share would be toast. 24 EI slots combined with how many BA for DUB? 7? And how many for BHD? Between the 2 carriers we are talking well over 500 million pounds in slot pairs to the Island of Ireland. I can see maybe 10 being operated by EI widebodies from DUB, with the current schedule being maintained from the other 3, with UK competition authority and Irish government insisting on maybe 8 being given to somebody else, but who? I doubt FR would be interested, or BE. Stobart? No way. Cityjet....there's a thought..... but yes I think it's a dead cert EI would be moved to T5 in IAG, I mean Iberia are there aren't they?

Anyway the slots left over can be given to the LGW 777 fleet, to be replaced at LGW by EI widebodies, if at all! Only remaining question is where BA can send those extra triplers

Last edited by Una Due Tfc; 20th Dec 2014 at 01:11.
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Old 20th Dec 2014, 07:06
  #36 (permalink)  
 
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Una due TFC,
I'm not sure the KL codeshare would be toast. Keeping KL out of DUB may be preferable to axing the codeshare. Besides I reckon only a matter of time before FR appear on the route, which may deter KL as the point to point portion of the service would be hotly contested. Not many of EI's big short haul routes left without an FR presence.

T5 is full to the rafters and there still are some BA services operating from T3, Expandion would be needed. IB services are only on 1 route and at most 2 gates are required . Vueling remains non T5, residing at 3.

I agree re capacity on london Aer Lingus routes;
Currently as an example BHD LHR combined BA and EI capacity is typically 9/10 rotations a day.
Typically let's say seats of approx 2665 a day( roughly mix of BA 320 and19's). Shifting all flights to 321 could result in (ei 212 seater) 6 rotations a day,7 to grow the route. 2 slots saved. Dublin potentially more if 321 and 330's used! And EI consideration of reintroducing business cabin quite aligned to the BA offer!
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Old 20th Dec 2014, 10:23
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Leaving aside the purely airline business fallout of the situation I wonder what the "political" view of this would be in Ireland. The Irish Government has steadfastly opposed any and all attempts at a takeover of EI by their very own major airline success story and I suspect the same government may be secretly hoping that FR will be forced to shed all or at least part of their current EI holding. So, how would it look at home if they were then to agree to sell out to, let's face it, a British operation?
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Old 20th Dec 2014, 11:24
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I think we're passed all the stick shaking anti-British nonsense that characterised politics for decades in this country. It's been recognised how important the 2 countries are to each other economically. I don't think the fact that the buyer is perceived to be British will be any factor.

The main concerns will be the future of the EI staff and what effect the government's stance will have on the voters of North Dublin, as well as any effects the potential consolidation of routes at LHR and loss of direct links to various destinations from DUB would have on the Irish economy as a whole

Last edited by Una Due Tfc; 20th Dec 2014 at 11:46.
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Old 20th Dec 2014, 16:56
  #39 (permalink)  
 
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I would imagine Aer Lingus short haul would operate much as today and still feed a long haul operation at DUB. Synergies in terms of fleet with Iberia and BA are pretty apparent and the chance to free up LHR slots by consolidating DUB/BHD ops would be huge. Given BA/IB operate on MAD, I don't see a huge problem with EI/BA using more A321s and fewer frequencies. BHD could go to BA and SNN/ORK would be too sensitive to drop I imagine. So a few more slots for BA long haul and the chance for EI to worl closer at feeding BA at LHR. EI long haul is not a significant player outwith Ireland regardless of how much feed they have, and to be clear, I am not criticising them for that. I would hope to see some expansion!
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Old 20th Dec 2014, 17:14
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I expect LHR-DUB will be operated jointly as LHR-MAD is by BA/IB.


As both airlines have a hub at each end of the route, schedules will be rejigged to eliminate night-stops away from base for both airlines.
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