Aer Lingus Seeks More Deals Like Virgin Lease as Ireland Stalls

Aer Lingus Group Plc, fighting a takeover bid from Ryanair Holdings Plc, said it’s targeting more deals like a contract-flying accord struck with Virgin Atlantic Airways Ltd. as the sluggish Irish economy restricts expansion.

Other options for boosting revenue include seeking to purchase further slots at London’s Heathrow airport, where the Virgin flights are based, to help maximize aircraft utilization, Chief Executive Officer Christoph Mueller said in an interview.

“We are limited in our organic growth due to the fact that Ireland is so small and not yet firing on all cylinders,” the CEO said yesterday in London, adding that while his company’s home nation is recovering in terms of exports, “there is still a long way to go with regard to cost of living.”

Aer Lingus will operate four fully crewed Airbus SAS A320 single-aisle planes for Virgin from next month, providing feeder traffic from Manchester and Scotland to its client’s Heathrow base via 24 daily flights. The Irish company expects to carry 1 million passengers a year under the deal, which came about after Virgin was forced to commence its own short-haul services when former partner BMI was taken over by competitor British Airways.

A surplus Airbus A330-200 wide-body will also operate from Scandinavia to the Caribbean on behalf of a major tour operator for the next three winters, Mueller said yesterday, with the plane to be used on trans-Atlantic flights during the summer. That’s after a lease deal with United Continental Holdings Inc. for flights between Madrid and Washington expired in October.

Heathrow Ambitions

At capacity-restricted Heathrow, the 23 pairs of takeoff and landing positions that Aer Lingus uses for its own Irish flights mean it could make better use than other carriers of single slots that might become available, bundling them with existing holdings.

The scarcity of slots at Europe’s busiest airport compels some other carriers to have jets standing idle for 3 hours rather than the optimum 25 minutes, Mueller said.

“If you are based at Heathrow and you can just use another aircraft for the return trip and keep the whole thing spinning, that’s much better,” he said. “We’re looking in that direction.”

Demand for contract flying, known as wet-leasing when crews are also provided, is likely to increase as airlines look at ways to pare expenses while maintaining a presence in key markets, the CEO said.

“We see opportunities because more and more carriers in Europe are cutting to the chase and asking the question, ’on which routes are we making a profit and which a loss?’” he said. “To make life easy the guy with the better cost position flies and the guy with the better revenue position sells.”

To contact the reporter on this story: Kari Lundgren in London at klundgren2@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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