I thank committee members for the opportunity, following our correspondence, to discuss our concerns with them in person. I am director of network and alliances at Virgin Atlantic, which means that I am responsible for the airline’s network decisions and relationships with key partner airlines, including that with Aer Lingus. Before setting out our concerns and perspective, it is important to clarify that Virgin Atlantic neither supports nor opposes the proposed acquisition of Aer Lingus by IAG. What we oppose and have concerns about is this acquisition going through unchecked. There needs to be proper consideration of, and a clear and effective plan to remedy, the inevitable diminishing competition in air travel for Ireland and the harmful effects this will have for consumers travelling to and from Ireland.
Each year, more than 500,000 passengers travel between Ireland and long-haul destinations, connecting at a UK airport. The predominant choice for Irish consumers, when travelling long-haul to many destinations not directly served from an Irish city, is to fly via the UK with Virgin Atlantic, British Airways or another long-haul carrier carrying them on their onward long-haul sector to their final destination. Virgin Atlantic is proud to serve approximately 100,000 of these passengers on itineraries to and from Ireland annually. Good air connectivity between Ireland and the UK enables this traffic to flow, in combination with an interline agreement between Aer Lingus and Virgin Atlantic, which allows customers to connect between our services. The interline agreement enables competitive fares, good onward connection times and baggage transfer between our respective flights. This means that customers can check in at their point of origin, be it Dublin, Cork, Shannon or Knock, and collect their baggage from the luggage carousel in Barbados, Hong Kong, Los Angeles or wherever on our network they are flying to. Ireland is an important market for Virgin Atlantic, and more important, the competition we and others provide through long-haul connections at Heathrow, Gatwick, and Manchester airports is important to Irish consumers.
Virgin Atlantic is unashamedly pro-competition and it is the reason we were founded. We have fought since that date in 1984 to give customers a real choice when it comes to long-haul air travel. Competition drives down prices and improves service levels and that is why it matters so much to Irish consumers. We want to be sure that they are protected from any adverse impacts of IAG’s acquisition of Aer Lingus, and that the hard won benefits of competition earned over many years are maintained. If an Irish family travelling on holiday to the Caribbean, or a businessperson travelling to a meeting in Hong Kong, wishes to fly with Virgin Atlantic, right now, it works. In the same way, if they want to fly British Airways, they can. That is choice, which is something this deal should not deny the Irish consumer in the future. If IAG’s proposed acquisition of Aer Lingus is allowed to progress unchecked, this choice is at risk. IAG will have a monopoly on flights between Ireland and the UK that enable the vast majority of these connections and it will be able to withdraw from interline agreements with airlines that provide competition for connecting passengers.
How can competition be maintained? We have outlined three key questions that we believe need to be asked and then answered on behalf of Irish consumers. First, what legal guarantees have been sought from IAG that the frequency of flights and seat capacity offered by both Aer Lingus and British Airways between Ireland and the UK will be retained? We have seen what happens when competition and capacity falls away on routes. Typically, reductions in frequency or seat capacity leads to negative impacts on the service level provided and inflated fares, leading to higher prices for customers. IAG has made public offers of commitments on Aer Lingus frequencies, which the committee has discussed with its representatives, but, importantly, it has made no promises about BA's services, leaving it free to reduce BA frequencies following the transaction. Any commitments should be extended to cover British Airways as well as Aer Lingus in order that the current level of frequencies across the combined BA-Aer Lingus partnership is maintained. There must also be consideration of how seat capacity can be maintained in order that IAG does not simply downgrade the size of aircraft deployed on these routes.
Second, has the Government sought assurances from IAG that it will carry on working with Aer Lingus's existing partner airlines, preserving the competition that Irish consumers benefit from today? It would be lovely to hear that IAG had recognised this and was discussing this with the committee but in reality the value of competition to consumers in this case is probably not at the forefront of IAG's thinking. When BA merged with BMI a few years ago, the opposite happened. Shortly after the transaction concluded, pre-existing BMI interline arrangements were switched off, depriving consumers across the former BMI network of choice when it came to making connections. Only regulatory intervention after some time restored that choice to a limited extent. Commercially, it is perfectly rational for IAG to want to keep connecting passengers on its own network. It would have no reason to offer access to its customers to its long-haul competitors. Unchecked, this deal gives IAG the opportunity to do that and to squeeze airlines such as Virgin Atlantic out of the Irish market and funnel consumers onto its own services. The Government and Parliament have a strong voice in this deal. The Aer Lingus shareholding and Ireland's membership of the EU enables them to ask IAG for commitments in any proposed deal. The EU will review the proposed transaction from a competition perspective to which they and the committee can have an input. If interline agreements are genuinely and fully protected, consumers can be protected.
Third, what measures has the Government identified as necessary under a European Commission remedy to ensure competition is maintained for Irish consumers in the event that the transaction proceeds? In answering this, it is important to go back to the two enablers of competition today. The first is the preservation of effective competition and air connectivity between the UK and Ireland for all consumer types, including those who are time sensitive and connecting, and the second is to maintain effective interline partnerships for connecting passengers. The first of these is partially addressed in discussing frequency or capacity commitments. The Commission typically has applied a slot remedy in these scenarios in an attempt to encourage new competition on the routes where competitive harm has been identified. We support that but the track record of uptake of such slots is poor and, therefore, meaningful capacity and frequency commitments from IAG as a backstop to a slot remedy are needed. Second, to address the needs of connecting customers, there should be a requirement on IAG to enter into effective interline agreements with Aer Lingus's existing partners. These agreements must include a special prorate agreement in order that airlines other than IAG can offer competitive fares with attractive connecting times and smooth transfers. The Government and the European Commission must consider these important impacts on competition in its evaluation of IAG’s proposed acquisition of Aer Lingus. We urge the committee and the Government to act on behalf of Irish consumers in pursuing these remedies. If they believe in maintaining a competitive environment to benefit the consumer, then they will believe in these remedies to protect them.
Virgin Atlantic has been serving Irish consumers since we launched in 1984. We work hard with Aer Lingus to provide the best service to it.
I am here today to champion consumers regardless of whoever they choose to fly with. We at Virgin Atlantic love competition; it is the reason we exist. If the Irish consumer loses this choice, the competition that drives all airlines to keep prices low and service levels high will be lost, to the great detriment of Ireland, its businesses and its people.