Aer Lingus

European airline consolidation to enhance financials? Few deals to be done, at least locally

European airline margins have underperformed other regions for years. There are many reasons for this, but our analysis suggests that Europe’s relative lack of consolidation may be a significant one, since margins appear to be correlated with market concentration. Even after a number of significant deals over the past decade, the European market is less concentrated than North America, where consolidation has gone further, to the benefit of margins. Europe is also less concentrated than Asia-Pacific (analysed as its sub-regions), whose margins have consistently been the highest.

If consolidation brings structural benefits, are there still European deals that can make a difference? Europe has a long tail of small carriers, which are unlikely to have a significant impact, but comparison with North America points to the potential for further combinations among the top five. Nevertheless, there are hurdles to such deals, not least of which are the ongoing restructuring programmes at Europe’s Big Three and the incompatibility of LCC/FSC mergers, but some second tier groups could be targets.

Airlines in Transition part 7: What keeps CEOs awake at night?

Have you ever wondered what it is like to run an airline? In the closing session of CAPA’s Airlines in Transition conference in Dublin, CNN’s Richard Quest grilled a panel of CEOs on their chief concerns. Conference delegates were treated to a thought-provoking, revealing and sometimes surprising discussion that provided a rare insight into the airline CEO’s brain.

Airline CEOs Christoph Mueller of Aer Lingus, Willie Walsh of IAG, Dave Barger of JetBlue and Montie Brewer (formerly) of Air Canada were joined by James Davidson of technology company Farelogix. Topics discussed included how to balance a wide range of issues, the impact of industry consolidation, the acceptance of return on capital as a key measure and why restructuring is enjoyable.

Aer Lingus looks to partnerships and new smaller aircraft across the Atlantic for long-haul future

Having gone through a restructure in recent years, Aer Lingus is now focusing on growth, organic and virtual, CEO Christoph Mueller stated on the sidelines of CAPA's Airlines in Transition conference in Dublin. Long-haul of course is the focus for a European carrier given its profitability, and Aer Lingus is looking to expand frequency and overall capacity in North America by using smaller aircraft than the carrier's all-A330 long-haul fleet. Aer Lingus will target new destinations as well as look for where it can gain synergies with key codeshare partners JetBlue Airways and United Airlines.

Ireland's geography makes it a conducive hub for North America-Europe flights, but less so for flights east of Europe. Asia and Australia are home to a large but diverse Irish diaspora, which Aer Lingus will actively target for the first time through its partnership with stakeholder Etihad Airways. These destinations are locations Aer Lingus could not and would not be able to serve independently. Aer Lingus is also looking to leverage its low operating cost and seasonal demand by expanding its wet-lease portfolio, which includes short-haul flights for Virgin Atlantic and long-haul flights for Novair.

Airlines in Transition 5. Lighting Candles: Innovating to make profits: Big Data, Advanced Analytics

“It is better to light a candle than to curse the darkness” – Confucius

The size, variety, speed and complexity of data available to the airline industry is growing rapidly, as with other industries. The importance of data use, the roles of intermediaries, the arrival of new players into the aviation data arena – such as social media, Google and Apple – and developments in consolidation, partnerships and collaboration along the supply chain make innovation essential.

Moreover, airlines need to work with airports, to facilitate connections and passenger flows, to reduce costs and to enhance revenues; and with IT solution providers to improve data interfaces across the “aviation ecosystem”, to improve efficiency and to enhance the revenue-generating opportunities arising from data sources. In this fifth report on CAPA’s Airlines in Transition conference, we examine the framework presented by airline strategist Nawal Taneja and the subsequent panel discussion.

Airlines in Transition part 3: How full service airlines are reshaping models to be more competitive

Over the past three decades, airline industry profits followed a fairly consistent cyclical pattern until the turn of the twenty-first century, which has so far seen seven loss-making years. If 2013 reports a profit, as forecast by IATA, the industry will have had four years of positive results (2010 to 2013). Nevertheless, profits are insufficient to cover the cost of capital and full service carriers still face critical challenges.

The global economy is still weak, fuel prices remain high, LCCs are undermining the legacy carriers’ short-haul markets and the rapid expansion of Gulf carriers is having an impact on their long-haul markets. In our third report on CAPA’s Airlines in Transition conference, we look at how FSCs are responding to these challenges.

European airline labour productivity: CAPA rankings

This analysis updates CAPA's previous study of European airlines’ labour productivity ("European airlines’ labour productivity. Oxymoron for some, Vueling and Ryanair excel on costs") to reflect the most recent financial results and adds four carriers not included in the original article (Wizz Air, Aegean Airlines and the two IAG subsidiaries British Airways and Iberia).

The contrasting performance of LCCs and legacy carriers is clear, although there are some notable exceptions to the pattern. BA and Iberia’s different labour cost productivity is significant, while Air France-KLM and SAS are weak performers.

We introduce an overall CAPA European airline labour productivity ranking, revealing the carrier with Europe’s most productive workforce, based on six measures.