Aer Lingus is planning a major fleet and route expansion using the estimated €470 million ($600 million) from its initial public offering.
Roughly 60% of the formerly government-owned carrier will be traded on the Dublin and London stock exchanges from 2 October. In September it set a share price range of €2.10-2.70, which values the airline at €1.1-1.3 billion.
In its prospectus, Aer Lingus says it will invest €2 billion through 2012 to double the size of its narrowbody fleet and expand by 50% its widebody fleet plus replace some existing aircraft. The Irish flag carrier now operates 28 Airbus A320/A321s on 66 single-class short-haul routes to the UK and Europe. It uses seven A330s on two-class long-haul services to four US cities and Dubai.
"Aer Lingus intends to increase profitability by expanding its fleet and route network, maintaining disciplined cost control, offering widely available low fares with a service that distinguishes it from its competitors," the carrier says.
It plans to launch new services in the Irish-US market, where it already is by far the largest carrier with 48% market share. The prospect of a more liberalised Irish-US bilateral will "provide Aer Lingus with potentially significant opportunities to expand its two-class long-haul network by providing non-stop service to additional destinations in the USA and increasing frequencies on routes flown".
Following the successful launch of its Dubai service in March, Aer Lingus "has also identified other long-haul growth opportunities east and south of Europe in the medium term".
The carrier is also bullish in the short-haul market with more point-to-point routes planned as the Irish economy continues to soar. Traffic at Dublin airport surged by 29% from 2001 and 2005 and Aer Lingus says it will benefit from the opening of 15 more gates in 2007 and a new 27-gate terminal in early 2009. It already controls 27% of the slots at Dublin airport and is also the fourth largest slot holder at London Heathrow.
While it was restructured into a low-fare carrier in 2001, Aer Lingus has been able to charge a premium because it operates into centrally located airports with high frequencies and offers assigned seating. Aer Lingus, which will exit the oneworld alliance next April, has been highly profitable since the restructuring, thanks to an almost 50% reduction in unit costs.
It says high aircraft utilisation, low costs, a young fleet, point-to-point flying, higher web bookings and ancillary revenues drove the turnaround. It will continue to focus on these, with new sources of ancillary revenues planned including charges for all check-in bags on short-haul flights. "Aer Lingus believes its business model is scaleable and that significant economies of scale can be generated from incremental increases in capacity," it says. ■
Source: Airline Business
