10-Sep-2010 2:00 PM

Aer Lingus CEO expects air travel demand to stay down into 2011

Aer Lingus CEO Christoph Mueller has stated he expects demand for air travel to stay depressed into next year, in a speech to the Chartered Accountants Leinster Society in Dublin (RTE Business/Breaking News, 09-Sep-2010). Highlights of Mr Mueller’s speech include:

  • Low-cost model: Mr Mueller no longer believes following Ryanair’s model of “fare-cutting” is the best way to stimulate traffic. He added that he would not be boosting capacity or offer loss-making tickets “just to lure passengers to Aer Lingus at a time when the Irish economy remains weak”. Mr Mueller said that Aer Lingus has “entirely abandoned” the low-cost model, as the airline hasn’t stimulated demand with it;
  • Capacity: “There will be no growth in Aer Lingus, (the airline will keep the same) capacity into next year.” The CEO added that he “might revise capacity plans if the market improved by next summer”;
  • Irish aviation: Air traffic to/from Ireland has declined by 40% over the past two years. Mr Mueller said Aer Lingus is operating from a “zero growth” mindset, adding that Irish demand for air traffic “will not reach pre-crisis levels any time soon, if ever”;
  • Trans-Atlantic services: Aer Lingus “has been successful” in attracting trans-Atlantic passengers to transfer over its Dublin hub. He believes Dublin Airport’s new T2 will help the airline build traffic for longer-haul services;
  • United Airlines cooperation: The trans-Pacific joint venture with United, which sees Aer Lingus operate Washington DC-Madrid services, was “profitable after only five months” of operation. The CEO confirmed he is looking at adding a second aircraft in 2011 to operate on the sector;
  • Aer Arann partnership: The franchise agreement was "performing well", and Aer Lingus would help Aer Arann “in whatever way it could” to emerge successfully from the examinership. Mr Mueller ruled out any suggestion Aer Lingus would directly invest in the Irish regional;
  • The Irish economy: Ireland must “get wage rates across the economy back to a competitive level”. Mr Mueller stated that a key reason for past investment in Ireland was competitive wage rates, and noted that “everything” is significantly more expensive in Ireland than other countries. The CEO is restructuring Aer Lingus and plans to reduce the airline’s costs by EUR97 million p/a.

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