Oneworld move could cost Aer Lingus

AER LINGUS could lose up to €50 million a year in revenues from its decision to pull out of the Oneworld airline alliance.

Aer Lingus was one of the earliest members of the alliance, which allows airlines to sell tickets on each others’ routes.

However, in May the company said it would exit the Oneworld as it focused more on increasing its own direct passenger base.

According to the airline’s investment prospectus, it needs to continue a code-sharing arrangement with British Airways and American Airlines, or face a loss of revenue.

“If Aer Lingus’ code-sharing and interline arrangements with British Airways and American Airlines, which provides connectivity outside Aer Lingus’ own network and which accounted for 5.4% of Aer Lingus’ passenger service revenues in the year ended December 31, 2005, are not maintained following exit from the Oneworld alliance with effect from April 2007, this could lead to a significant reduction in Aer Lingus’ passenger revenues and/or may alter the competitive environment in which Aer Lingus operates on its transatlantic and other routes,” the prospectus said.

The possible 5.4% drop in revenues could cost the airline nearly €50m.

For passengers, the end of the Oneworld club means they will not be able to use air miles points or gain access to airport lounges operated by other members of the alliance.

The prospectus also said the airline is still in a legal fight with former chief executive Michael Foley, who was sacked in mid-2001 after being accused of sexually harassing two Aer Lingus employees.

Mr Foley is seeking “substantial damages” from his former employers. A spokesperson for the airline would not quantify how much he is seeking.

The prospectus also says current Aer Lingus chief executive Dermot Mannion is the subject of agreement not to work for another airline for 12 months after leaving the company.

Mr Mannion, who was hired from the UAE’s Emirates group after the exit of Willie Walsh and other executives in 2004, has a three-year fixed contract with Aer Lingus.

If the contract is terminated by Mr Mannion he has agreed to give six months’ notice and will not work for another airline in Ireland, Europe and the US. This covenant falls if he is sacked by the board.