‘The internet saved us’, says Aer Lingus boss

29 Sep 2003

The internet is now the primary sales channel for Aer Lingus, accounting for more than 50pc of all ticket sales and is responsible for enabling the airliner to transform itself from loss-making to profit, according to CEO Willie Walsh.

Speaking at the fifth annual Irish Internet Association Conference Walsh confirmed that e-tickets now account for 70pc of all Aer Lingus tickets deployed and that in January next year the company will install the first of its electronic self-service check-in kiosks in Irish airports.

“Today, the internet is Aer Lingus’ primary sales machine,” Walsh said. “And its use has enabled us to cut down the costs of distribution – the cost of getting the customer to check in – by almost 66pc.”

According to Walsh, the airliner’s woes began in 2001 with the onset of the global business downturn, Foot & Mouth disease and the cancellation of that year’s St Patrick’s Day Celebrations. These were exacerbated by the 11 September attacks in the US and more recently the SARS epidemic. “There was a perception in the airline industry that we were the worst affected of them all,” he said. Overall, the airline industry lost $13bn in 2001 and $11.6bn in 2002. It was struggling with over-capacity and over priced flights. However, other players like Ryanair, which recently made profits of $264m and its inspiration in the US Southwest Airlines made profits of $400m for the 30th consecutive year.

“We had a choice, circle the wagons and wait for it all to pass or break the mould. There was a need for structural and financial change in the industry; our airfares were too high. Low fares were key, with more direct flights to new destinations. We decided to target more and more direct sales through Aerlingus.com,” said Walsh.

“We needed a permanent shift and reduced the cost of business and economy seats by 50pc. We now have a much more simplified structure. That is crucial in the internet age,” he added.

Implementing 2,100 staff cuts and organising its fleet of aircraft more efficiently, Aer Lingus managed savings across the board of 30pc on average. “The main conduit for this was the internet, which enabled us to revamp our sales structure and reduce commissions we paid to travel agents. We now pay 0pc commission in the US and only 1pc in Ireland and the UK. Distribution costs have fallen by 66pc as a result of a more direct interaction with the customer and the implementation of e-ticketing, or ticketless travel.

“From January we will be able to reduce costs even further by introducing self-service check-in. At present 80pc of flights sold directly with Aer Lingus are ticketless and all advertising we do is tactical and geared towards driving people to aerlingus.com,” Walsh explained.

“In 2001,” he continued, “only 2pc of ticket sales at Aer Lingus were done via the internet. At that stage the internet was used only for advertising and research. In one year we grew it to 40pc of passengers and today more than 50pc of customers buy their tickets online. The site gets 80,000 visitors a day. In 2001 our ticket distribution costs were €132m, in 2002 they were €60m. We expect that by the close of this financial year, our distribution costs will have fallen by 85pc.

“More than 70pc of Aer Lingus’ sales inventory is on the web and we have been able to move to new products like car rentals, hotels and travel insurance. The next major changes on our site will include 28-day travel searches, corporate portals and TAB redemption programmes. Up until now, all Aer Lingus advertising was around the website, this will be boosted towards more tactical advertising geared at prices of individual flights. We have also implemented a new premium SMS service that will enable people to text for a short list of the latest flight price offers.”

Walsh concluded: “The results of our transformation over the web, a move towards low fares and through operational efficiencies are clear in terms of our financial performance. In 2001 we made an operating loss of €52m. Within a year this had shifted to an operational profit of €64m, and this year we are aiming towards a target of €75m in operational profits.”

By John Kennedy