eirmoney | Ryanair and Aer Arann

Ryanair and Aer Arann

Posted by Anil Bagra | 27 February 2010

Ireland aviation industry fights hard to move past recession blues

The aviation industry in Ireland seems to be in the middle of a consolidation. Regional carrier Aer Arann has entered into a franchise arrangement with Aer Lingus amidst falling passenger numbers. The domestic service, covering 12 routes between Dublin and Cork, will be called Aer Lingus Regional. Apart from consolidating existing nine routes of both the airline companies, the agreement entails three new routes. While the franchise agreement will use the brand name of Aer Lingus to attract more customers, all operational and commercial responsibilities will be borne by Aer Arann. Aer Lingus will charge a franchise fee in return.

The decision is in the best interests of both airlines as the recession affected industry is witnessing lower occupancy rates. The brand name of Aer Lingus, one of the biggest players with 7.46 million passengers last year, will help Aer Arann win some more passengers.

Aviation players in Ireland are bracing themselves to negate the effects of lesser passengers travelling. While Aer Arann reported a 32 percent decline in number of passengers to 326,400 from 480,230 in 2008, the situation isn’t very rosy at other airlines. Aer Lingus is planning to introduce some more pre-flight and in-flight paid services in its bid to increase revenue. On the cost side, the airline expects staff cost savings of €40 million in current year. The cost restructuring program is likely to result in higher gains in 2011 and 2012. The airline expects the first half of 2010 to be weak and forecasts full year revenues lower than 2009. Aer Lingus is planning to introduce new short-haul routes from Shannon to the UK to take advantage of the relatively better occupancy rates in flights to Manchester and Birmingham.

Aer Lingus recorded close to seven percent decline in passengers in 2009, while another low cost carrier (LCC) Ryanair witnessed an 11.7 percent fall in passenger numbers. Ryanair has announced plans to take three of its aircrafts off-duty from Dublin airport. Bad weather conditions in January also added to the woes of airline companies as the bookings took a nosedive.

Ireland’s economy was one of the hardest hit in the Europe by the economic downturn shrinking by 10 percent in 2009. While the central banks world over are rejoicing the benefits of stimulus funds as their economies emerge out of recession, Ireland’s economy is still struggling in shambles. The Central Bank & Financial Services Authority of Ireland expects the emergence from depression only in the second half of this year. The bank is of the view that the economy is close to the trough of the recession and the only way to go from here is up. However, some more employment losses and further weakness in economy is expected in the first half of the year. The recovery, in the second half, is likely to be gradual, led by export sector. The bank also took a jibe at property boom in the country calling it an unbalanced domestic development.