LONDON – The US Department of Transportation (DOT) has tentatively signed off on Aer Lingus (EI) joining the OpenSkies joint venture on transatlantic offerings, which will fuse the likes of American Airlines (AA), British Airways (BA), Finnair (AY) and Iberia (IB).
All that EI has to wait on now is for the other airlines in the venture to agree on its approval, which could be seen by the end of the year. It is understood to be the second antitrust approval made by the DOT this year after it signed off on Delta’s (DL) agreements with WestJet (WS).
What Does This Mean for Aer Lingus?
For EI, this enables the airline to offer more options for travel between the United States and Europe, consisting of full frequent flyer mileage, lounge access and more.
It also enables interconnectivity on the other airlines in the venture, which would benefit Aer Lingus by an additional $67 million in benefits from its base of operations at Dublin Airport (DUB).
This is considerably good news for Aer Lingus as it now gets a leg-up on what is already a heavily saturated transatlantic market, where such consolidation is needed.
Aer Lingus applied to join this joint venture around two years ago, offering the argument of expansion of flight options overseas.
Its previous CEO Stephen Kavanaugh also argued that it was an obligation of the International Airlines Group (IAG) which owns the likes of BA and IB. The DOT has ruled this approval will “not substantially reduce competition” as well as it not being “adverse to the public interest, and should therefore be approved”.
“With Aer Lingus’ addition, over time the carriers are expected to expand capacity on some existing routes while introducing services on several new routes, allowing more options for travel to and from Ireland and the rest of Europe”.
“These aircraft offer the capability of transatlantic flying with relatively fewer seats and lower trip costs. Given the presence of an LCC with substantial market share pre-Covid, the relatively low barriers to entry that will be further reduced, and the presence of three other competitors to Aer Lingus, the Department anticipates ample competition will exist to thwart any potentially anticompetitive behaviour.”
The last quote is referring to low-cost carriers that are beginning to penetrate the transatlantic market, meaning that such competition exists and that it will not cause any issues to other airlines.
Continued Benefits, Conditions
At the moment, the airline owns around 44% of the market share on flights between Ireland and the United States. It is understood that once the airline joins the venture, that it will amount to 60%, offering a staggering 16% increase.
One of the other conditions for such approval is over the release of transatlantic slots by BA and AA from airports in the United Kingdom, as agreed on by the UK Competition and Markets Authority (CMA).
There has been considerable discussion over the 10-year binding commitment, which has been extended until March 2024 due to the COVID-19 pandemic. It is understood that the CMA will wait until air travel recovers before the agreements are looked over again. Either way, it looks set to be agreed on by such antitrust-based institutions.
Airlines in the joint venture now have two weeks to make its decision, with the expected result due to be an approval of the carrier to join the agreement.
With BA and IB influenced by IAG, which also owns EI, there is no reason why such an approval won’t take place. From there, all eyes will be on the airline to grow its market share on the Irish-American links, especially as we begin to head towards the distribution of a vaccine for the COVID-19 virus.
In-all, this is significant news for Aer Lingus, and will be something to keep the airline going both in the short-term before thriving in the long-term.
Featured Image: Aer Lingus Airbus A330-300 in the new and updated livery. Photo Credit: Wikimedia Commons