Yesterday, Dermot Mannion,chief executive of Aer Lingus, announced that Aer Lingus had signed a strategic partnership with US low-cost carrier Jetblue. According to Mr Mannion this deal "will enable us to grow our revenues and grow passenger numbers" and additionally "introduce the Aer Lingus brand to new markets". The Irish Times headlined this today as "US deal to open 51 routes for Aer Lingus" and Reuters headlined the same story as "Aer Lingus forges ticket alliance with Jet Blue".

On hearing and reading this one would be forgiven to believe that this was a positive "strategic partnership" that would enhance the Aer Lingus brand and add value to the company and its shareholders. From what I have read the deal is'nt even signed, as negotiations are on-going. Asked if Aer Lingus had put together any projections on future passenger growth and therefore revenue? the answer was "no, not at this time".So, it would appear that according to Mr Mannion, Aer Lingus will grow but it will have nothing in place to assess or analyse the effect of this decision. This is beginning to resemble Enron, when its management felt that having a balance sheet was'nt necessary.

On further examination it would appear that the "deal" is simply placing buttons on each others Websites allowing access to each other. Very strategic?.Indeed the announcement also seemed to catch Jetblue off guard who went on to say "that no deal had been agreed, and negotiations were ongoing". When this was put to Mr Mannion he conceded that "there were details that still need to be worked out". Apparently these details include, revenue sharing arrangements and various customer services issues including checking in luggage in Ireland to final destinations in the US and elsewhere. This should prove fun given that Jetblue's model is one that we are all familiar with, ie Ryanairs. I can see us all arriving in Bermuda without any luggage.

Another aspect that was'nt reported in Ireland was that Jet Blue "is still in partnership talks with other international carriers" so should this deal with Aer Lingus go through and Jet Blue also signs similar agreements with other carriers, I have a feeling that capacity will become an issue.

This is bad management, Aer Lingus could find other ways of increasing its revenue by simply increasing its load factor on it transatlantic flights from its present, and declining 80.6% to say 85% would increase its passenger numbers by almost 55,000 passengers. If you use an average return fare of €500 this would equate to €27.5m, and it would the management that would control this strategy, and it will not depend on an outside third party for growth.It may also cost justify the two new 315 seater aircraft that will be on the transatlantic routes later this year. Analysts believe that should this deal go through there will be no increase in revenue for Aer Lingus.They also believe that Aer Lingus should be focusing on the competition that is invading its space in the form of American, Delta, and now Flyglobespan operating from Knock, which by the way needs to be applauded, and shows what can be done with proper strategic thinking.

I can't help feeling that the Management of Aer Lingus is out of its depth in managing this company, it is making profits due to the work put in by former CEO Willie Walsh and his team. The present Management appear to be falling from crisis to crisis,  it became embroiled in another row with unions last week on its cost cutting plan it emerged that the business plan that was finalised days before flotation 4 months ago, is now not worth the paper its written on. I wonder how many investment houses are scratching their collective heads now asking "have we been sold a pig and a poke?". Class action law suits are not uncommon when these things happen.

Aer Lingus share price is presently about €2.91, a valuation that I believe has a Ryanair premium embedded, and valuations for its slots, for example in Heathrow, justifying the price. If Mr Mannion et al d'ont start doing some hard work and stop announcing "incomplete deals" I can see Aer Lingus been broken up and sold off, in a similiar way Eircom was broken up and had 4 new owners in 8 years.I feel the loss felt this time should Aer Lingus go the same route will not be confined to small investors but to all of us as a whole.

I wonder then what will happen to the consumer when Aer Lingus is no longer with us?

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I came across this today in finfacts.

Are you serious?

 The original slice of your blog appears to imply the the Airline is simply entering into a basic 'code sharing' agreement which means 'not a lot'. I fail to understand the 'rant' after the first few lines. Perhaps you can elaborate, preferably from sources and 'analysts' you aren't quoting directly from?

The other babble is nothing that hasn't been heard before from the airline industry (You are conviently forgetting wee Willies previously battle with the unions at Aer Lingus). Part and parcel of the industry is that it's open to all sorts of outside fources (that do not have such a revenue impact) in any shape or form on any other type of business.

'Class action' my ass... who jumped on the float wagon in the first place?

Please delete as usual...

The "agreement" firstly is not a "code sharing" agreement, it simply allows both companies to place links on each others websites. My criticism of Dermot Mannion, and his management team, is not about entering into agreements, but its announcing agreements that either d'ont exist,or only exist in the mind, one of the two parties involved. See finfacts link in the first comment above.The other criticism is the "trumpeting" of this deal by Aer Lingus and certain sections of the Irish Media, as being signed, sealed and delivered, when clearly it was not, and may not be, depending on negotiations.I feel that the Aer Lingus management team should concentrate on its core business, using the assets it has, and replacing them or buying new ones when its commerically viable.

I agree with you that "wee Willie",as you describe him, did have his problems with the unions, and continues to have problems with the unions at British Airways, but he still drove the company foward, whether you agree with his style is matter for each of us, and turned Aer Lingus into a profitable and commercial Airline. The difference between Walsh's team and Mannion's team is that, the latter does not appear to have a clear plan, as the original plan of 4 months ago is now defunct, much to the ire of the unions, I appreciate it does'nt take alot to get the unions going, but it appears to the outside world this management team is limping along, directionless.

I also agree with you that the industry is prone to outside influences, but its managements job to have something in place to combat these contingencies, and I also appreciate that nobody has a "crystal ball",but a plan is a basic minimum for any business, no matter what the size.

PS, on the point of deleting comments, I d'ont delete comments that encourage debate, as your comment does. I delete comments that are personal attacks or has nothing to do with the issue.

 

Maybe as a follow up Aer Lingus can use Google Adsense on their site and then send a press release to the city analysts about how they've signed a huge deal with Google...

 

I have to say that you maybe right in your criticism of Aer Lingus management. I read today that an "unskilled operative", whatever that is, reportedly earned €110,000 and thats from a basic package of €33,000. The question I have is, did this person go home at all?. How the hell can management allow a person to earn so much? What about the working time act?. Looks like this management team will drive the company into the ground, pardon the pun..............

I think that you are referring to the Irish Times article, and I agree. It also went on to say that Senior Management are considering a pay freeze for themselves. I can only recommend that they do the job of the "unskilled operative". I thought such draconian terms were a thing of the past.

At least they have reduced the fuel surcharge by €10 each way on long-haul, late but as with everything else reactionary strategy and management at its finest.

I am not an union fan, but I beginning to trust what they say before what the company is saying.

You are right, Aer Lingus did reduce the Fuel surcharge but increased fares to compensate. I was listening to Joe Duffy and two people phoned in to complain that when they went to book flights to the US, one lady said that the flights to New York were €350 , in total, more expensive for the same flights than what they were yesterday.Another caller said that a flight to Chicago yesterday was €249 including fuel charge of €80 but with the reduction of €20 the price went to €299.

I just cannot believe the sheer incompetence of this lot...........

I heard that, I was actually driving and almost crashed into the car in front. Joe Duffy went on to say that they contacted Aer Lingus and a spokesperson said "that Aer Lingus had suffered a technical fault with its systems". So there you have it, Mannion states that the JetBlue deal will be "run by machines" and its booking system appears to encounter "a technical fault" on the very night that prices should come down, sceptical ??????

I wonder should they have a look at that "unskilled operatives" wages, you know the one that earned €110,000, to ensure that the payroll system did'nt suffer "a technical fault" also. I still feel that the only fault with this company is the management.

Blondie, I owe you a thanks for starting this debate, when you wrote your blog "Airline Scams".

Thanks we need more

From a shareholder perspective, I am uneasy, when "wee willie" left there was a sense of uncertainty surrounding the float. They pressed on, and I bought in, but the only reason I sit on a paper profit at present is the fact the O'Leary is sniffing, and we have Heathrow slots.

I lost money in Eircom, as did many others, and to look back I feel Aer Lingus could go the same way. I still feel there is upside on the price, but management appears to be an issue.