Sunday, 14 August 2011

Aer Lingus: Back to the Future ©

The airline industry which continues to evolve a rapid pace, being driven by a combination of factors including airline consolidation ,poor economic conditions and high fuel costs.

This environment has lead to airlines re-evaluating their business models, to ensure success in highly competitive market conditions, to deliver value for the customer and shareholders.

Aer Lingus too has evolved in the constantly changing market place, interestingly the changes taking place has seen the carrier literally going back to the future, by adopting elements of it’s past business models ,and combining them with the latest trends in the industry, particularly with demand management and information technology.

The airline under the leadership of Christoph Mueller ,the carrier has re-positioned itself as a ’Value Carrier’ adopt facets of the low-cost business and full-service business models, to differentiate itself in the market-place, dominated by low cost carriers.

The carrier began it’s journey back to the future by moving away from the Low-Cost Business model by re-focusing on the strength of it’s brand in customer service, re-connecting with its customers, rather than competing directly against Ryanair on price.

The carrier hast returned to the turboprop through its franchise agreement with Aer Arann to operate the Aer Lingus Regional using a fleet of five ATR72s from bases in Cork, Dublin and Shannon commencing operations on the 28th of March 2010.

The launch of Aer Lingus Regional was nine years after the last Aer Lingus Fokker F50 EI-FKE was retired service from service on the 22nd of April 2001, with the introduction of Aer Lingus Regional the carrier has come full circle. Aer Lingus Regional continues to go from strength to strength , with the carrier winning back market share from Ryanair, on the Dublin to Glasgow route.

The closure of SR Technics Ireland Ltd in 2009 saw Aer Lingus re-assume Hangar 6 which lead to the formation of a new company Aer Lingus Ireland Ltd being created to manage the line maintenance requirements of the parent company, in-sourcing work which was previously outsourced to SR Technics.

In addition to providing line maintenance functions , the hangar will later this year become the HQ for the carrier, when the Head Office Block (HOB) is vacated and handed-back to the Dublin Airport Authority (DAA) by the end of the year This will yield further cost savings and efficiencies of the carrier.

A key element of Project Greenfield is to drive efficiency in the operation, which the move to Hangar 6 enables the company to centralize functions which where previously carried out in the Technical Building and Pier A offices.

Aer Lingus Ireland Ltd like its predecessor Team Aer Lingus, it has generated third party business notably providing hangarage for a British Airways Boeing 747-400 to de-ice the aircraft in the December snows, customers that have availed of the facility recently include: Air Transat (A330), Alitalia (B777), Cimber Sterling (CRJ200).

It will be interesting to see if Aer Lingus Ireland will develop a third party offering, in the context of high fuel costs, it could become a new ancillary revenue stream for the carrier, to cushion against ever rising violate oil prices.

In December 1998 Team Aer Lingus was sold to FLS Aerospace and later to SR Technics who subsequently closed the operation in 2009, thirteen years later the Aer Lingus logo has returned to Hangar 6 driven by multiple factors sparked by the global financial crisis of 2008, which subsequently caused a further round of re-structuring in the airline industry which continues today, causing the cycle to go full circle.

Aer Lingus had a strong heritage and global recognition of developing an industry skills base through its Maintenance and Engineering division and its pilot and technical training programmes up to the 1990s. This faded away in the 1990s driven by an industry which became increasingly focused on outsourcing and sale off of non-core functions, therefore losing what where previously core competencies.

However under the Leadership of Christoph Mueller he identified these core competencies as an necessary skills for the future of the airline, being an important capacity to be developed in tandem with the government policy of developing an knowledge based economy, by widening the skills base of the economy.

Aer Lingus announced the launch of a new Apprentice Aircraft Maintenance Engineers scheme in March to commence in the Autumn, for the first time in over 20 years, a clear indication that it is building an skills base for the future, and for the first time in many years it announced a new Cadet Pilot Training Programme, under which the airline would part-fund with the successful applicants.

Aer Lingus is clearly setting itself in the airline industry engaging with new employees to create loyalty into the future, by investing in their future, re-building the skills base, at a time of increasingly market pressure from Global Alliances, Low-Cost Carriers ,the Middle East ‘3’, the carrier is taking a long-term, rather than a shot-term view.

Interestingly in the 1980s/1990s Aer Lingus had a strong presence in the charter market when the fleet used to be extensively used at the weekends to fly to destinations in the Canary Islands and Med. The Aer Lingus business model changed to a Low-Cost Business model post 9/11, which saw the carrier launch schedule routes on pervious traditional charter routes.

The market has come full circle , using excess capacity and the opportunity to earn additional revenue, increase aircraft utilization, the carrier has re-entered the IT market segment, which it exited 10 years ago, with the carrier to operate three flights this winter, from Cork to Salzburg and Dublin to Salzburg and Toulouse for the Winter 2011 Ski Season on behalf of Direct Ski and Topflight.

In conclusion the industry continues to evolve at a rapid pace, with Aer Lingus going back to the future, to secure an competitive advantage, by developing its core competencies. The Aer Lingus investment is a positive development for the future to be welcomed.

I added an link to the Aer Lingus TV Ad run in the late 1980s ‘You're Home' in the era of the Boeing 737-200s and Boeing 747-100s to bring back some notasliga. This Advert was shown at the Aer Lingus 75th Birthday Celebrations held in Hangar 6 in May 2011.

Irish Aviation Research Institute © 14th August 2011 All Rights Reserved.