Strategic overhaul
Aer Lingus’ chief commercial offi cer, Stephen Kavanagh, talks to John Strickland about the new network strategies it is adopting in the face of a challenging economic and competitive environment.
A
er Lingus has been through turbulent times in recent years. Saved from bankruptcy by former CEO, Willie Walsh, the company enjoyed several years of strong profi tability and achieved a successful partial privatisation. Since then, it has found itself the target of two hostile takeover bids by Ryanair and in 2009 plunged back into heavy losses, after suffering from a challenging market environment. The arrival of new CEO, Christophe
Mueller, in late 2009 signalled the start of a fundamental review of the company’s business, a process that is now well advanced. There are early signs that this could be bearing fruit, with Aer Lingus posting reduced losses in the fi rst half of 2010, a return to profi tability for the second and third quarters of the year, and projected overall profi tability at year end. Chief commercial offi cer, Stephen Kavanagh, explained the key components of the strategic change in direction to Routes News.
Having moved from its legacy roots to become an airline largely based on the low-cost model, Aer Lingus is in the process of repositioning itself to fulfi l what it sees as its key mission: to connect Ireland to the world at competitive prices.
This does not mean that it will turn its back on what it has learned – there will still be a rigorous focus on costs and there will be no return to business class or full frills service on short-haul routes.
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The very nature of the Irish market dictates that this is the case, explains Kavanagh. “Upwards of 80% of traffi c is price sensitive with very little true business traffi c,” he says. “Levels of [Ireland’s] GNP growth went into signifi cant decline, so we went back to basics to understand the price sensitivity.” Part of this involves adapting its approach to pricing and to the management of its network. Low fares will
remain on a structural base linked to “natural demand” rather than from promotional price campaigns, which may generate potentially profi tless additional volume. The focus is clearly on revenue per seat rather than on load factor or yield in isolation. The airline is also experimenting with new fare families and bundled products that meet different customer segment needs. These are based on creating potential additional revenue with
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