Aer Lingus A commitment to delivering growth and low fare access for Irish Tourism - Submission to National Tourism Policy Review Group 25 March 2003
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Aer Lingus
A commitment to delivering growth and low fare
access for Irish Tourism
Submission to National Tourism Policy Review Group 25 March 2003Aer Lingus Submission to National Tourism Policy Review Group
Executive Summary
• Aer Lingus is committed to continued growth and low fare access to
Ireland:
6.2 million passengers carried in 2002
target 7 million passengers 2003
fares reduced by up to 60% during 2002
3.5 million low fare seats sold during 2002
13 new routes opened since November 2001
planned growth for transatlantic routes 2003 +18%
planned growth for continental european routes 2003 +17%
Jan/Feb 2003 transatlantic passengers up 33%
Jan/Feb 2003 continental european passengers up 40%
• We have contributed significantly to tourism growth:
55% traffic originates outside Ireland – 3.4 million passengers
41 international routes served directly
1994-2002 US originating traffic grew by 100% to 595,000
passengers
1994-2002 European traffic growth of 54% to 5.3m passengersAer Lingus Submission to National Tourism Policy Review Group
• We can contribute significantly more provided the following issues are
addressed
Significant opportunity to double transatlantic visitors if US
gateways constraint on Aer Lingus was removed
50% of transatlantic traffic still travels indirectly into Ireland via
other European gateways
Following many years of growth Aer Lingus transatlantic traffic is
now effectively capped due to the existing gateway limit
Access to low cost airport facilities is critical to future traffic
growth
With the cost of air access at an all-time low, other parts of the
tourism industry must lower their prices if Ireland is to remain
price competitive as a tourism destinationAer Lingus Submission to National Tourism Policy Review Group
1. BACKGROUND
Aer Lingus is committed to providing low fare travel to our customers into and out of Ireland.
In the last twelve months we have reduced our business and leisure fares by up to 60% and
opened a series of new routes into and out of Ireland, including Barcelona, Nice, Malaga,
Alicante, Faro, Prague, Vienna, Geneva, Cork-Malaga, Jersey, Bologna and Lisbon.
In Summer 2003, we resume service to Washington with the addition of a seventh aircraft on
our transatlantic routes.
Aer Lingus today operates 41 international routes between Ireland and the UK, Continental
Europe and the USA.
Ireland UK Continent USA
Dublin London Amsterdam Malaga New York
Cork Manchester Paris Barcelona Boston
Shannon Birmingham Brussels Alicante Chicago
Glasgow Dusseldorf Nice Los Angeles
Edinburgh Frankfurt Faro Washington
Jersey Munich Prague
Madrid Vienna
Rome Geneva
Milan Bologna
Lisbon
Scheduled passenger traffic increased by 66% in the period from 1994 to 2002, from 3.7m to
6.2m. Passengers purchasing tickets outside Ireland increased by 48% over the same period,
from 2.3m to 3.4m. Of total Aer Lingus traffic in 2002, 55% originated outside Ireland.
2. TRANSATLANTIC GROWTH
There was a significant increase in transatlantic traffic over the period 1994-2002, from 0.5
million to 0.9 million. US originating passenger traffic doubled between 1994 and 2002, from
297,000 to 595,000. This growth coincided with the relaxation of the ‘Shannon stopover’
aspect of the Ireland-US bilateral, whereby the requirement for all transatlantic services to
stop at Shannon was relaxed, permitting up to fifty per cent of operations to serve Dublin
directly.Aer Lingus Submission to National Tourism Policy Review Group
Ireland-US Air Transport Agreement
The Bilateral agreement between Ireland and the United States, which governs air services
between the two countries, restricts Aer Lingus to four gateways in the US – New York,
Boston, Chicago and Los Angeles. An American airline, on the other hand, can operate from
any US gateway into Ireland. Both Irish and US carriers must operate at least 50% of their
flights non-stop to/from Shannon, i.e. each designated US and Irish airline may operate one
scheduled non-stop flight to/from Dublin for each scheduled non-stop flight that airline
operates to/from Shannon.
Between 1994 and 2001, Aer Lingus expanded its network to cover all of the above four
gateways. In 1994, Aer Lingus introduced the Airbus A330 aircraft to the transatlantic as the
replacement for the 747. With the introduction of the A330 aircraft, we could increase
frequency on the JFK and Boston routes. Chicago was added in summer 1996, and in 1997
with the arrival of the 5th A330, we added Newark, a second New York airport, to
complement JFK. Service to Los Angeles commenced in 1999. In 2000, Aer Lingus was
granted extra bilateral authority to serve Baltimore Washington under “The Underserved
Cities Program”, which aims to develop new international services from US cities. Approval
was granted without a renegotiation of the current bilateral. By Summer 2001, Aer Lingus
was operating nine wide body aircraft on the transatlantic. Our scheduled flights had
grown from 34 per week to two gateways in Summer 1994, to 120 per week over five
gateways in Summer 2001. Aer Lingus carried over one million passengers on its
transatlantic routes for the first time in 2000 and repeated this again in 2001, despite the
significant effects of Foot and Mouth and September 11 that year on air traffic.
Transatlantic Traffic
1200000
1000000
800000 Total
600000 US
400000
200000
0
Target 2003
1994
1995
1996
1997
1998
1999
2000
2001
2002
1994-2002
Following the events of September 11 2001, services to Newark and Baltimore Washington
were cancelled. Overall transatlantic capacity was cut by 25% with an operating transatlantic
fleet of 6 aircraft. 2002 saw a better than expected performance with over 900,000
passengers carried in the year and a significant improvement in load factor particularly in the
off-peak and Winter months as customers responded to our low fare initiatives. Adding a
seventh aircraft in 2003 will see the re-introduction of service on Baltimore Washington, and
additional supplemental flying on Ireland-New York, taking our weekly frequency up to 94
flights in Summer 2003. Aer Lingus will provide 1.3 million seats on the transatlantic this
year, an 18% increase in seat capacity over last year.Aer Lingus Submission to National Tourism Policy Review Group
Future Development
There is enormous potential for development of further US gateways. However, the existing
bilateral precludes an Irish airline from adding additional cities. A US airline can however,
fly from any US city to Ireland. This situation, we believe, places Aer Lingus at a
competitive disadvantage.
Aer Lingus would open a number of further gateways in the US if this situation were to
change with a major benefit to Irish business and tourism. This could lead to a doubling of
transatlantic visitors to Ireland within a short timescale. The top sixteen indirect USA
destinations include the following cities:
San Francisco Miami Seattle St. Louis
Philadelphia Minneapolis Dallas Denver
Orlando Detroit Pittsburgh San Diego
Las Vegas San Jose Phoenix Houston
Aer Lingus is a member of the oneworld alliance and with our US codeshare partner
American Airlines, are well positioned to capitalise on new gateway opportunities that would
emerge in the United States if the gateway limitation were removed. Under an “Open Skies”
scenario we would also codeshare with our US partner to a wide range of other US domestic
points.
With service now limited to four designated gateways and Baltimore Washington, Aer
Lingus must continue to rely on connecting services to serve destinations beyond our
gateways. These destinations include major US airport hubs that have direct service to other
European cities. At a time of stringent new security measures in the US, connecting service
is at a serious disadvantage to direct service. We expect security will come under increasing
pressure in the future. Increasingly passengers will take direct service from their home
airport to the available destinations, without the inconvenience of a transfer at a domestic US
airport. This will have a negative impact both for Irish tourism development and for Aer
Lingus as the main provider of transatlantic capacity between Ireland and the US.
While there has been significant growth over the past nine years on the transatlantic, the
gateway limit will now become a more significant barrier to further growth for Aer Lingus as
we have exhausted the number of gateways we can serve. In 1994, Aer Lingus served only
New York and Boston. By 2000, we were operating to the four designated gateways and
Baltimore Washington. While there is room for traffic growth to pre September 2001 levels
on the existing gateways, a step change will only come from new gateway cities and the
stimulus effect of direct service.
Our track record of growth between 1994 – 2001 shows that we can deliver on the potential
growth targets once the constraints are removed.Aer Lingus Submission to National Tourism Policy Review Group
50% of transatlantic traffic is still indirect
For example, London is the nearest of several major European hubs, with direct service to
numerous US destinations. Tourists will continue to travel to Ireland via cross-channel air
and sea links. However, it is more likely that such traffic will visit Ireland only as an
extension of a UK holiday, thus reducing the time spent in Ireland. Secondly, as concerns
over price competitiveness in the Irish market emerge, Ireland could suffer further traffic
erosion as the first choice tourist destination.
3. EUROPEAN GROWTH
The addition of 12 new routes on the European network during 2002 is a significant
milestone in Aer Lingus development. New routes such as Bologna and Vienna are targeting
aggressive inbound tourist growth, while others, such as Malaga and Alicante are catering to
Irish market demand.
- Aer Lingus traffic on continental european routes increased from 0.79 million in 1994
to 1.7 million in 2002, an increase of 120%
- Fares reduced by up to 60% in 2002
- A total of 5.3 million passengers carried on all short haul flights in 2002
- Continental european capacity growth of 17% in 2003
The proven commitment of Aer Lingus to the provision of low fare access is facilitating
cheap and efficient access to Ireland. The 2002 addition of 12 new routes, bringing our
shorthaul network to 34 direct routes into Ireland, is further evidence of our ability to “walk
the talk” in this regard.
Low cost airport facilities at Dublin
Aer Lingus supports the policy of developing low-cost facilities at Dublin Airport both
through the temporary Pier D facility and through the building of a second terminal in
competition with Aer Rianta. Aer Lingus plans to continue to add new routes in such an
environment with the lower costs brought about by competition between airport terminals
greatly facilitating this growth.Aer Lingus Submission to National Tourism Policy Review Group The example below for a roundtrip fare from Glasgow to Dublin illustrates the high percentage of the total cost that goes in airport taxes and fees. Glasgow-Dublin-Glasgow aerlingus.com fare UK£ 16.00 Airport Taxes & Charges UK£ 22.70 Handling Fee UK£ 2.00 Total UK£ 40.70 Taxes and Charges as a percentage of total 58% On a current aerlingus.com promotion from Dublin to Glasgow, the airport charges situation is even worse! For €19.99 each way including taxes and charges, the airfare component is just €3, or 15% of the total journey cost, while the taxes and charges are a massive 85%. We strongly believe that airport taxes and charges now represent a disproportionate element of the cost of air travel. Value for money for tourists With virtually all airlines reducing the cost of air travel for customers, it is imperative that other elements of the supply chain reduce their costs and lower their prices to facilitate further growth. This will be a major factor in continuing to grow the tourism market into Ireland. Recent reports from Bord Failte’s visitor attitude survey point to growing evidence of a decline in satisfaction, particularly in value for money. If tourist word of mouth is negative about the experience in Ireland, this will impede traffic growth, as cheaper airfares alone will not always change people’s perceptions. Increasingly European cities have low cost carriers serving many destinations across Europe. The customer has access to cheaper airfares so a key factor will be the overall cost competitiveness of the tourist destination. Irish tourism must seriously address this issue if further growth is to be delivered.
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