Aer Lingus has indicated that if no resolution is reached in the current cabin crew dispute within 22 days, the airline will commence implementation of its EUR97 million cost reduction plan (Businessworld/RTE, 19-Mar-2010). The plan was rejected by a large majority of cabin crew belonging to the IMPACT Union. Following the rejection, the carrier stated it would eliminate all 1,200 cabin crew positions and rehire the majority of cabin crew at lower pay, with 230 staff members to be made redundant with only a minimum redundancy allowance. Separately, the IMPACT Union stated it would hold a second ballot on the cost cutting programme, following a meeting with the Labour Relations Commission.
Aer Lingus to proceed with cost reduction plan if no resolution in cabin crew dispute is reached
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Aer Lingus part 2: vies with Icelandair, airberlin, Norwegian as leading Nth Atlantic value carrier
Aer Lingus' mission statement includes an aim to be the leading value carrier across the North Atlantic. Although this is not explicitly defined, it can validly claim to be among the top four in this category. Also vying with Aer Lingus for this title are Icelandair, airberlin and Norwegian.
Part 1 of this report on Aer Lingus looked at the development of its capacity and its financial performance, both before and after the acquisition by IAG in Aug-2015. This second part compares its North Atlantic network and its unit cost positioning with those of Icelandair, airberlin and Norwegian.
All four are currently pursuing rapid growth between Europe and North America and have similar weekly seat capacity scheduled in this market for summer 2017. Their trans Atlantic networks differ by their numbers of North American destinations, European hubs serving that region and European destinations connected to those hubs.
Aer Lingus is well placed among the four, but cannot currently claim to be the leading North Atlantic value carrier. Norwegian, with multiple European long haul bases, is developing quite differently from the other three. Moreover, although Aer Lingus is cost efficient, Norwegian has a significant CASK advantage.
Aer Lingus part 1: N Atlantic has led growth. Taken over as IAG's star after first full year
2016 was Aer Lingus' first full year under IAG ownership, following its acquisition on 18-Aug-2015. This first part of CAPA's report on Aer Lingus considers its capacity growth and financial performance. Part 2 will compare its North Atlantic network and its unit cost in the light of its aim to be the leading value carrier across the North Atlantic.
IAG has largely reinforced the strategic path already adopted by Aer Lingus. Its North Atlantic led capacity expansion has accelerated, with trans Atlantic seat numbers growing by a half from summer 2014 to summer 2017. On short haul capacity has grown very little, but load factor improvement has driven traffic growth (important for long haul feed).
Aer Lingus suffered from a fall in unit revenue in 2016, but continued with a trend of improving profit margin that had begun in 2014, thanks to falling unit cost. Lower fuel prices played a role in CASK reduction in 2016, but so too did ex fuel unit cost, including labour productivity. Aer Lingus had the second lowest return on invested capital in IAG when it joined the group, but has risen to be its best performer on this measure. Cost will be key to its maintaining superior returns.