Economies of scale
The last ten years has been a declension for Aer Lingus Even after applying recent costreduction model, Aer Lingus costs will still be higher than those of competitors
Supply costs
Strategic location of the head office Ireland is a favoured location for MNC:s Supply costs are still high, compared to rivals
Experience
Aerlingus
More than 75 years in the business Over 80 flight destinations "On track for profitability"
Product/Process
Enhanced order process for customers More flexible website New IT system introduced to remove manual processes Effective fleet utilization
Cost efficiency (Johnson Gerry, Scholes Kevan, Whittington Richard p. 100, 2008)
Economies of scale Aer Lingus is one of the carriers who experienced declension after the terrorist attacks in 2001. After that, some competitors have attained Economies of scale, a great competitive advantage and Aer Lingus has in comparison higher costs. It can be concluded that Aer Lingus hasnt attained economies of scale yet. Aer Lingus has since 2009 been through a cost-reduction program The Plan. With an aim to attain EOS, through among other factors removing redundant administration, businesses processes and adopt a more cost efficient and competitive business model. (RTE RADIO 1, 2010) Process/product design Aer Lingus has implemented a cost-effective way to allow customers to book reservations online without impact on the companys bandwidth costs. The main communication channel to the customers is the website, its therefore important to make the procedure smooth and attractive. Customer demand is heavier at certain periods than others, and the flexibility of the website is an important factor. (Microsoft, 2010) In 2010 a new IT system was introduced to reduce cost by removing manual processes, transferring information seamlessly between departments and providing better management information. (RTE RADIO 1, 2010) The new IT system will also maintain effective fleet utilization and low unit cost (cost to fly one seat 1 mile) these are both critical factors. (ITIC, 2011) Supply costs Since Aer Lingus transports people and goods, it can be assumed that head office and fleetbase location both are important factors. The company is specialized in short haul trips, Dublin and Dublin International Airport can therefore be seen as a very strategic location to
be based on. According to GrantThornton, Ireland is considered a favoured onshore location for multinational companies and this is another reason to have headquarters here. Still, according to Financcial Times, Aer Linguss costs is slightly higher than those of EasyJet and considerably higher than those of Ryanair. Experience Aer Lingus has over 75 years of experience in the business and has a fleet size of 51 airplanes. (Aer Lingus, 2011) They fly to over 80 destinations and are this year according to themselves on track for profitability. (Aer Lingus Investor & Analyst Day, 2011)
Kllor (RTE RADIO 1, 2010) Aer Lingus cost reduction plan, RTE RADIO 1, No date, (online). Available at: http://www.rte.ie/news/morningireland/aerlingusplan.html (Accessed: 24 January 2012) (Microsoft, 2010) Airline Improves Service Offerings, Developer Opens Opportunities with Cloud Services, 6 November 2011, (online). Available at: http://www.microsoft.com/casestudies/Windows-Azure/Aer-Lingus/Airline-ImprovesService-Offerings-Developer-Opens-Opportunities-with-Cloud-Services/4000007566 (Accessed: 15 January 2012) (ITIC, 2011) Aer Lingus - Member Profile, ITIC, October, (online). Available at: http://www.itic.ie/mempro-aerlingus.html (Accessed: 26 January 2012) (Aer Lingus, 2011) Company Profile, No date, (online). Available at: http://www.aerlingus.com/aboutus/aerlingusmedia/companyprofile/#d.en.818 (Accessed: 26 January 2012)
(BusinessWeek, 2011) Airline deregulation, revisited, Businessweek, 20 January (online). Available at: http://www.businessweek.com/bwdaily/dnflash/content/jan2011/db20110120_138711.ht m (Accessed: 21 January 2012) (Aer Lingus Investor & Analyst Day, 2011)Investor & analyst day, 28 September, (online). Available at: http://www.aerlingus.com/media/aerlinguscom/content/pdfs/corporate/Investorday_2011 _FINAL.pdf (Accessed: 29 January) (GrantThornton, 2010) http://www.grantthornton.ie/db/Attachments/Publications/Tax/PV%20Grant%20Thornton %20-%20Tax%20advantages%20of%20Ireland%20April%202010.pdf
(The New York Times, 2004)
