IAG acquisition of Aer Lingus gets final EU clearance – with some conditions

The acquisition of Aer Lingus by IAG, the parent company of British Airways, is now certain to go ahead following the approval of the deal by the European Union.  This follows the announcement last week that Ryanair had agreed to sell its 29% shareholding.

The EU did not roll over entirely, however.

Aer Lingus 350

It has imposed the following conditions on the transactions:

British Airways must give up five slots at Gatwick (yes Gatwick, not Heathrow) which will be ring-fenced for any airline wishing to start London-Dublin or London-Belfast services.  Ryanair has already expressed interest.

Aer Lingus must continue to sell seats to other airlines wishing to use its flights to connect to long-haul services from Heathrow, Gatwick, Manchester, Amsterdam, Shannon and Dublin.  This means, for example, that Aer Lingus cannot refuse to work with Virgin Atlantic to allow Virgin to sell Dublin – Heathrow – Detroit as one ticket.

The full EU press release is here.

IAG has already made its own concessions – to retain the Aer Lingus brand (binding), to retain the core schedule for seven years (binding) and to launch four new long-haul routes (not binding).

Going forward, we can expect – and these are my guesses only – good news and bad news:

Good news:

tier points and full Avios points (as opposed to the current reduced number of Avios points) available on Aer Lingus flights

Aer Lingus redemptions to be available online via ba.com

Gold Circle points to be turned into Avios

ability to effectively earn Avios points on United flights in the US by crediting them to Gold Circle and waiting for the conversion to Avios

Aer Lingus to join oneworld

Bad news:

fuel surcharges to be added to Aer Lingus redemption flights to the US as soon as permission is received for the airline to enter the Iberia / Finnair / BA / AA pricing cartel on transatlantic flights

Aer Lingus redemption seats become harder to find – at present, because you need to ring to book them, few people know they exist

competition from members of other oneworld frequent flyer programmes for Aer Lingus redemption seats

None of this will happen immediately as the deal will take a couple of months to reach legal completion.  Whatever happens, Aer Lingus flights from Dublin to Boston will still be the cheapest way of flying to the US on Avios points.  It remains under 3,000 miles and therefore in the cheaper pricing band.

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Comments

  1. Mark B says:

    Releived that Boston hasn’t got further away :-)

  2. Does this mean that the “fuel surcharges” for the Dublin–>Boston flights are going to quadruple? Why? This is exactly the same flight, with exactly the same taxes and using exactly the same fuel, before and after the takeover.

    How were Aer Lingus able to fly this route with taxes and fuel costing only (say) £100? Are BA really so terrible at negotiating fuel prices from suppliers that the cost goes up to (say) £400? If BA really are that crap, it should be Aer Lingus buying IAG and not the other way around. If ever there was an opportunity to attack BA on these fuel charges, this is it. The ludicrous, arbitrary nature of the charge is really made clear when you look at what is happening to the cash element of redemption flights on that route.

    • They’re not really fuel charges as such. Well, a portion of them are, but most of the charges are carrier (ie. BA) imposed, and are simply profit-making for the airline.

      • Exactly. And when you see that BA will be charging it for this flight when Aer Lingus did not impose the charge for exactly the same flight, the naked profit-making nature of the surcharge is laid bare.

        BA really should describe it as the “cash element” of a redemption rather than a surcharge, and stop pretending that avios actually get you anywhere. They do not – they simply allow you access to some fixed-price flights.

    • American has no fuel surcharges but BA still adds £300 to an AA redemption transatlantic – and then pockets it.

      • Blackberryaddict says:

        How do you know BA pockets it? Since they have a joint venture on the North Atlantic, presumably they share revenues – including revenues from “carrier imposed surcharges”. All this reflects is different markets – ie the UK market accepts these charges, but the US market doesn’t.

        • It isn’t clear how the revenue share on the JV works, especially with regard to Avios seats. However, the ticketing airline keeps the fuel surcharge. That is standard policy AFAIK. It is why American Airlines does not add fuel surcharges to ANY redemptions except those on BA, even when the operating airline itself adds them. If they had to be passed on, AA would obviously have to charge them. Similarly, United in the US does not add fuel surcharges to anyone – book a Lufthansa redemption via United miles and you don’t pay a surcharge. Use Lufthansa miles and you will.

    • Nick M says:

      Anyway, it’s about time BA reduced their fuel surcharge… they can’t use the excuse that they hedge fuel for too much longer!

  3. Brendan says:

    Why do you think fuel surcharges will be added? Iberia haven’t added them or have they?

  4. You continue to sound sceptical about Walsh’s motives for this deal, Rob.

    But if you look at EI’s stats fo the year to June, long-haul passengers (ie transatlantic) were up another 15.6% whilst shorthaul was up just 1.5%

    This is all about turning Dublin (like Madrid) into another Heathrow runway for IAG (in the absence of a real third LHR runway).

    The new transatlantic routes are effectively binding because there are set deadlines for implementation and legal agreements relating to staffing. But regardless, IAG and the pretty good EI management team (who are staying in place) are already planning for next year’s launches.

    It’s a good deal for travellers even if they add fuel surcharges. The problem for IAG is that EI (like Iberia) now has a markedly better business offer than BA. Walsh will have to seriously upgrade Club World to bring BA into line with its sister brands.

    • Anthony Dunn says:

      You’re absolutely right: this is Willy Walsh putting his shareholder’s cash where his strategic view (that the UK lacks the cajones to build a new runway in London and the south-east/to have a coherent civil aviation strategy) leads him. That means IAG taking a serious tilt at all of that ex-UK regions traffic via KL/Schipol and attempting to siphon a lot of the westbound/trans-Atlantic traffic through DUB instead. If US immigration pre-clearance works well out of DUB, then this becomes a seriously attractive option.

  5. Hingeless says:

    I find it really amusing that everyone assumes that ba will use short haul slots to turn into long haul. Everyone expected the LBA flights to be temporary and the have now been in operation for 3 years. I think the point is that you can never predict what BA will do as we simply don’t have the research that they do.

    • Not sure what you mean. IAG will fly customers from UK and Euro regions to Dublin for transatlantic flights. Imagine they intend to use existing LHR-DUB services similarly.

  6. Londonbus says:

    The slot remedies are truly bizarre. GATWICK? Still, I thought FR already fly LGW-DUB.

    • It’s really odd and the EC decision seems to have surprised everyone.

      You’re right Ryanair does already have limited services from Gatwick (mainly to Ireland) but is keen to expand (to continental destinations),

      Obviously that will increase competition at Gatwick but the EC ruling still seems strange overall.

      • If Ryanair get the slots I would have thought that defeats the object of the slot Remedies as they would presumably be able to use the remedy slots for Irish services whilst repurposing their existing slots for other destinations. Consequently it wouldn’t necessarily result in any additional competition for IAG on the routes to Ireland.

    • Callum says:

      Makes perfect sense to me. The number of airlines willing to start a new LGW-DUB route are much more than those that would do LHR-DUB.

  7. Lochlann says:

    In some ways I’m not too surprised by the slots being LGW – it’s only DUB-LHR where EI and BA compete, and with Easyjet, Norwegian and Ryanair at Gatwick (as well as plenty of long haul operators incl. Virgin) you’ve got a better chance of the slots being used successfully (who would credibly come into LHR to operate to DUB, ORK, BFS/BHD etc given Virgin experience with MAN and Scotland?)

  8. Blackberryaddict says:

    After the slots debacle at LHR with Little Red, does anyone seriously believe that another airline would come in and use slots in LHR? Especially now the airline that has actually operated Little Red is being bought IAG. They had no alternative to offer slots at LGW. In fact, I think that is the deal that MOL and WW agreed between them. MOL was at IAG head office recently to hammer the deal out.

  9. In terms of EI flights remaining a sweet redemption option post the acquisition, they are a few scenarios that might well remain favourable.

    1) using AA miles to book EI redemptions out of Ireland. This might also include connecting via LHR.

    2) Using avios.com to book EI flights. If avios is consistant with its Iberia policy, then there will be no surcharges.

    3) booking using EI.com. Booking Iberia flights using Iberia.com is often cheaper. I wonder will we end up with EI avios , and being able to combine these ala Iberia.

    A couple of other points.

    Redemptions might well become easier to get as they will be available online, however that might be tempered by the fact that direct BA redemptions will now incur a surcharge, reducing the appeal to many.

    Aer Lingus has an extensive short haul schedule out of Ireland to Europe, currently it is practically impossible to get EI European flights using avios. This entire network should become available using avios. Yes surcharges might/might not apply, but it still opens up an entire new network for avios redemptions.

  10. I’m sure its too early to know what the conversion rate of Aer Lingus Gold Club to Avios might be, but I have a couple of transatlantic EI business flights coming up, any thoughts on whether these should be credited to a new Gold Club account (to convert later) rather than Avios? Thanks.

    • EI earning rates are generally pitiful so my gut feeling is that Gold Circle would be better, but we don’t know. Small risk it doesn’t come into Avios at all.