Airline discussing cost savings with Etihad

AER LINGUS and Abu Dhabi-based Etihad Airways have drawn up a list of 50 areas in which they might be able to co-operate and …

AER LINGUS and Abu Dhabi-based Etihad Airways have drawn up a list of 50 areas in which they might be able to co-operate and achieve cost savings to supplement the code sharing deal they announced on Monday.

“Over and above what’s happening on the code-sharing side, we’re looking a bit deeper into potential cost synergies with Etihad, in the area of simulator crew training, IT costs and such like,” Aer Lingus chief executive Christoph Mueller told The Irish Times yesterday.

“We have a list of up to 50 items where we can explore more synergies over and above the revenue.”

Mr Mueller said two working groups had been established to identify areas for cost savings and recommendations were likely to emerge “shortly after the summer break”.

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“They just commenced their work three or four weeks ago when we were hit with the bid so I had to re-prioritise slightly.”

Mr Mueller said the code-sharing deal with Etihad is expected to yield a “small, one-digit million number” in revenues for both airlines.

“Of course, it’s all business plan . It will only be known when we have the passengers flying. It is a nice extension to our network to destinations that we previously couldn’t offer.

“Also, our pre-customs clearance here will attract passengers from the Middle East travelling via Dublin.”

Under the deal with Etihad, Aer Lingus will have access to its network of flights from Abu Dhabi to Australia and Asia. Etihad will co-operate with Aer Lingus on 18 services from Dublin, including London Heathrow, New York, Boston and Amsterdam.

Etihad currently owns 2.987 per cent of Aer Lingus and reports in UK media earlier this week suggested that the UAE airline was eyeing a position on the board of the Irish company.

“No,” Mr Mueller said. “I read that with some surprise, but such an attempt was never made.”

Etihad has indicated its interest in acquiring the Government’s 25 per cent stake in Aer Lingus when it is put up for sale.

Mr Mueller hinted yesterday that swapping Etihad for the Government as a block shareholder in Aer Lingus might not be in the best interests of the airline.

“The only thing I’m tempted to say is that the shareholders of Aer Lingus suffer currently from the fact that we have so low a free float . Only 45 per cent,” he explained.

“If one principal shareholder is replaced by another principal shareholder without increasing the free float, we haven’t gained so much.

“There is a lot of water that will flow under the bridge but I don’t see in all honesty the Government in a position to firesale their 25 per cent. There is the pension , there is the bid, there is the European Commission , there is the UK Competition Commission .

“Many things need to be answered before a final shareholder structure can be found.”

Ciarán Hancock

Ciarán Hancock

Ciarán Hancock is Business Editor of The Irish Times