Seat 2B By Joe Brancatelli
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London's Next Great Airport? Dublin
August 13 2015 -- London remains the world's most important business travel crossroads and it will soon get the new capacity it so desperately needs. But in a wacky quirk of history, geography and aviation realpolitik, the extra space will probably be at Dublin airport and the new flights will operated by Aer Lingus of Ireland. Adamantly opposed to the high cost of a third runway at London's oppressively overcrowded Heathrow Airport, Willie Walsh is about to pull the trigger on a $1.5 billion purchase of Aer Lingus, where he was once chief executive. These days, Walsh runs the International Airlines Group (IAG), a holding company that owns British Airways, and he sees buying spunky Aer Lingus as a cheaper option than the estimated $26 billion cost of expanding Heathrow. The British government's latest scheme for the world's busiest airport "glosses over finances and airlines' ability to pay. How the hell are they gonna finance it?" the ever-combative Walsh asked last month. "We're not gonna pay for it." Walsh's solution: Buy Aer Lingus and route a lot of future transatlantic demand over Dublin rather than Heathrow or Gatwick, London's second-busiest airport. "Dublin will be London's third airport," one connected observer recently told me about Walsh's bid to buy Aer Lingus. "Even if they manage to build another runway at Heathrow, it's at least 20 years away given how things get done in England. That's four election cycles and many business cycles away. But Dublin and Aer Lingus are ready now to take on new traffic both from the U.K. and Europe." If these cross-cultural, multi-island, transatlantic high jinks confuse you, maybe we should step back a bit and explain the way the high stakes game of international business travel works just now. Three large airline alliances compete for our business across the Atlantic: BA is partnered with American Airlines, Iberia of Spain (also owned by IAG), and Finnair in Oneworld. The Lufthansa Group of carriers (Swissair, Austrian, Brussels and Lufthansa itself) are aligned with SAS of Scandinavia and United Airlines in the Star Alliance. Delta Air Lines, Air France and its subsidiary KLM of the Netherlands anchor the SkyTeam Alliance. The alliances swap routes and passengers and often share revenue in immunized joint-venture arrangements. Each carrier markets itself to corporations and business travelers on its own merits, but also stresses the inter-connectivity of the alliance in which it works. That brings us back to little Aer Lingus. With BA and the Oneworld Alliance maxed out in London, it needs more flights from more destinations across the Atlantic. Aer Lingus fits the bill nicely because it has a cache of precious take-off and landing slots at Heathrow, an expanding footprint in Europe and room to grow in at Dublin Airport. Ironically, Aer Lingus also flies to many more destinations (19) in the United Kingdom than does British Airways. And in case you haven't noticed, Aer Lingus has transformed itself in recent years into a high-quality, modestly priced carrier between the United States and Europe. It has expanded beyond its traditional gateways in Boston and at New York's Kennedy Airport and added nonstop flights to Dublin from Chicago, San Francisco, Washington and Orlando. (At least two more nonstop U.S. destinations will be added next year, Aer Lingus officials say.) From dozens of other cities, Aer Lingus has a remarkably seamless alliance with JetBlue Airways and is the only international carrier to fly from JetBlue's passenger-friendly Terminal 5 at JFK. There are elegant new departure lounges at JFK, Heathrow and its Dublin hub. A new arrivals facility in Dublin allows business class flyers to grab a snack, surf the Net, shower and have their clothes pressed before flying onto Europe or heading into Dublin. The in-flight service on Aer Lingus transatlantic flights has been sharply upgraded, too. Spacious new business class cabins, fitted out in grey and silver tones, have comfortable lie-flat beds and copious at-seat storage spaces. Meals and in-flight entertainment options have been expanded. The best perk of all? Business-class flyers receive free satellite WiFi that is surprisingly fast and reliable. For travelers headed onward from Dublin, Aer Lingus is altering its all-coach policy and adding a new service called Aer Space. According to chief commercial officer Mike Rutter, Aer Space flyers will be guaranteed an empty middle seat, free snacks and beverages, priority baggage handling, guaranteed carry-on space and airport lounge access. Aer Space should be flying before the end of the year on routes between Dublin and key destinations in the United Kingdom and continental Europe. Even the passenger mix has changed at Aer Lingus. As recently as a decade ago, 90 percent of its transatlantic traffic was flying to or from Dublin. Today, says Jack Foley, Aer Lingus' executive vice president of North America, just 60 percent of its traffic is headed to Dublin. The other 40 percent flies onward to Europe, the United Kingdom or elsewhere in Ireland. "We've done this ourselves. The reason IAG wants the business is because of what we've done in the transatlantic space," says Rutter. Three years from now, he claims, "Aer Lingus will be looked at as a European airline with an Irish flavor." All of which connects back to IAG boss Walsh's plan for Aer Lingus. The canny Irishman isn't just picking up Aer Lingus for its admirably low costs and high profits. The key is using Aer Lingus' operations in Dublin to grab more of the traffic that flows between the United States, the United Kingdom and continental Europe. Dublin is currently one of the few places in the world where the U.S. Customs service offers "preclearance," which means travelers complete entry formalities before boarding the aircraft heading to the United States. That allows Aer Lingus to offer flyers from the United Kingdom and Europe a faster and less stressful itinerary to the United States than if they flew over London's congested Heathrow Airport. "About 70 percent of the growth of Aer Lingus after the IAG buy will be carrying customers between the United Kingdom and the United States," one IAG insider insists. "They'll connect through Dublin more quickly than if they flew through London."
A note to readers: If you'd like a deeper dive into the Aer Lingus-London-British Airways story, surf to this week's Brancatelli File for more details.
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