Aer Lingus Abandons Low-Cost Model

You may remember that a couple of years back, a struggling Aer Lingus decided to go the low-cost route, acting as a low-cost provider on European flights.  They felt that given Ryanair’s success, there was no way they could compete on intra-European flights with them and, rather than give up those routes or form a subsidiary to handle them (which is the typical response in Asia to this situation), they decided to try to compete directly against Ryanair.  So much for that:  their CEO has announced that the airline has abandoned that strategy, and is now focusing on carrying passengers over Ireland as a way of working through that country’s recession.

And it’s starting to work.  An unusual arrangement with United on joint venture flights between Dulles and Madrid via Dublin (operated by Aer Lingus) allows the airlines to split revenues and risk.  That venture is already profitable after a few months.  On other trans-Atlantic Aer Lingus flights only 20% of people are terminating in Ireland.  This sounds like the Icelandair model, where if they can get costs down, they can be a lower priced alternative to Europe (and with Americans able to clear customs in Shannon, it’s not much extra time at all).

Aer Lingus doesn’t have much choice – it’s seen a 40% drop in Irish passenger demand in the past 2 years.

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