Winners and losers in the IAG/Aer Lingus Deal

Now that the Irish government has agreed to terms with IAG regarding the sale of its stake in Aer Lingus  we get to the fun part of speculation regarding who wins from the deal. And, perhaps even more fun, guessing at who might pull a short straw thanks to the changes. Or are we looking at a scenario which is relatively change free?

Airlines

Both IAG and Aer Lingus almost certainly come out of this deal as winning, at least at the corporate level. IAG gets the opportunity to integrate additional feed into Heathrow on the 23 slot pairs Aer Lingus brings to the deal, but there is also a 7-year moratorium requiring those slots to serve flights to/from Ireland so the feed will really only be passengers which probably could have already been brought in to the routes anyways. Eventually that will change, of course, but even initially the slot utilization that way isn’t so bad.

For Aer Lingus the promise of new planes and additional transatlantic routes is a big win. The specifics behind the promised four new routes are not yet public but there are likely a few US or Canadian destinations which could use a bit of competition across the Atlantic.

Aer Lingus is also likely to join the transatlantic joint venture with American Airlines and its IAG partners, British Airways and Iberia. This has the potential to further improve the financial performance of the carrier given the ability to coordinate on schedules and pricing. The carrier will also almost certainly join the oneworld alliance, bringing more connecting flight options into the realm of possibility, though tighter

For some other Aer Lingus partners such as JetBlue this deal likely raises a few red flags. With the shift towards the TATL JV and the oneworld alliance odds are that one-off partners like JetBlue will be less useful to Aer Lingus. That relationship is relatively balanced today with both sides feeding the other well. Once Aer Lingus has American Airlines and the BA network on its side, however, the balance would shift significantly, even if the partnership were to remain. And Aer Lingus just built a brand new flagship lounge facility in JetBlue’s JFK T5. Similarly the carrier has a relatively extensive bilateral partnership with United Airlines. Much like the JetBlue deal that is almost certain to disappear in short order.

Passengers

I suppose it depends on the individual passenger needs, but there is definitely good and bad likely to come from this deal. A stable company is a good thing and the new routes should be great, though coordinated pricing and schedules means less competition which typically translates into higher fares. That would be bad for the price-sensitive leisure traveler. Perhaps the biggest winners will be the TATL customers who live in the UK but not in London. For these travelers access to the US market over Dublin (or Shannon) is likely to become much improved, with better traffic flows, an easier connection experience, and pre-clearance for US immigration and customs. For those regional passengers headed elsewhere things should also get a bit easier as transit through Heathrow should become a bit easier with some connections pushed west. And BA can better market (ie find higher-yielding O/D traffic) more of the long-haul flights rather than filling with lower yielding connecting passengers.

Loyalty

As is the case with every loyalty change this one is very much a personal situation. As alluded to above, the partnership (including loyalty) will shift with the deal. Aer Lingus members can already earn points on British Airways flights but adding in the rest of the oneworld alliance partners should be a good thing for those customers. There is also a good chance that the Gold Circle program will be retired and members shifted into the Avios program. That could be good or bad overall, but given the high number of shorter flights Aer Lingus operates and the relatively low price for awards on short flights I’m mostly calling that a win. For travelers collecting points in other oneworld alliance programs the advantages of adding another carrier and route network to the earning and redemption options is obvious. And for United MileagePlus members this deal means losing a redemption partner.

Ultimately more people get more access to the earn & burn on EI-operated flights so that’s a net positive, I think, but there will still be some disappointed.

There is also the potential that we will see a change in the way fees are charged for reward redemptions on Aer Lingus flights. Currently there are only minimal YQ/YR fees tacked on to the points rate. And maybe that won’t change. But there’s a decent chance that it will as the airline shifts in to the TATL JV where all the other partners use those fees as part of the fare structure. It would not really work to have one set up differently. While that matters very little when it comes to regular fares for most customers it will matter a lot when it comes to awards. Combine that with recent changes to the Avios award chart for premium cabins on longer flights and things aren’t quite as great as they could have been.

Overall I think the deal is probably a good one for most everyone. There are a few small groups who will lose out one way or another but on the average most consumers should benefit, the airlines will benefit and even most loyalty program members should. I think. I suppose we’ll find out soon enough.