Aer Lingus has unveiled a new business model in an attempt to drag itself out of the financial mire. The former state carrier is now branding itself “Ireland’s civilised airline” as part of a plan to reposition itself midway between low-cost Ryanair and full-service carriers such as British Airways.
The airline hopes to raise its share in the business travel market by offering faster check-in times, pre-paid meals and – in contrast to rival Ryanair – centrally-located airports. However it will not offer premium lounges, free food and drinks associated with full-service airlines.
The airline’s “civilised” tag is seen as a swipe at arch rival Ryanair, which has twice tried to buy Aer Lingus and remains its biggest shareholder with a stake of 29 per cent.
Chief Executive Christoph Mueller has planned the repositioning as a demonstration that Aer Lingus can survive, and avoid a take-over by Ryanair.
Mueller, who started in the job nearly five months ago, has been trying to stem massive losses suffered by the airline as it expanded during a recession that hit its three core markets of Ireland, the UK and the US.
He said: “The basis will remain a low-fare offering of transportation from A to B with an assigned seat.”
“And then the customer can add on service elements (such as) lounge access, hot meals on board, fast-track and all these amenities we can offer.” He believes the current Aer Lingus share price undervalues the company, and he will be relying on management to change that situation.
He plans cost savings of €97m (£85m) a year by the end of 2011, in part by cutting staff numbers by nearly a fifth and removing several senior pilots.
His presentation was an attempt to show investors how he aims to improve revenue at the airline, which is expected to report a pre-tax loss of €108m for 2009. The airline burned €400m of cash reserves last year but still has a strong balance sheet with gross cash and deposits of €825m.
However, he warned that market conditions would remain “extremely challenging” this year with the first half being very weak, partly due to low January bookings following bad the poor weather.