The reasons Aer Lingus should join a global airline alliance were listed thoroughly in the Salomon Smith Barney report yesterday, but there was less detail about how such a move would benefit customers, and almost no mention of lower ticket prices. Questions have also emerged about whether the current period of stagnation in the airline industry represents the ideal moment for a flotation.

The Salomon report is largely uncritical of Aer Lingus management, concurring with every proposal the company made. In particular, it agrees that Aer Lingus should enter a global alliance, that it should choose One World as its partner, and that a flotation will be necessary to keep the airline in profit.

The report lists several benefits of being part of a strategic alliance:

They overcome cross-border ownership restrictions and generate merger-type benefits without endangering traffic rights.

They can generate capacity and operating efficiencies and help improve the return on capital.

They allow airlines access a much wider range of passengers and destinations at a lower cost than operating independently.

They allow the transfer of technology and operational expertise, and enhance the ability to adopt best practices or undertake meaningful benchmarking.

Customers benefit from enhanced brand and competitive positioning, including seamless connections, more facilities and better frequent-flier programmes.

"It is becoming increasingly risky for airlines unaligned to a global strategic alliance to remain independent," the Salomon report suggests. "Aer Lingus remains the only major European carrier outside a strategic alliance, except for Olympic Airways."

Aer Lingus's analysis demonstrated that remaining as an unaligned carrier would cost the airline £20 million (€25.4 million) in profits a year, Salomon adds.

"Furthermore, given the volatility of airline earnings, this impact could occur within a short period of time, perhaps 12 to 18 months, and would be exacerbated by a cyclical downturn in the global economy or as a result of industry factors," the report says.

Salomon is just as complimentary to Aer Lingus management about its choice of partner: "The benefits from an alliance with American Airlines (AA) and British Airways (BA) will be extensive and outweigh those available as a result of the proposals from other airlines."

Some of the reasons for preferring One World include:

AA's network in the United States, and BA's regional British and European routes, represent opportunities.

One World's marketing and frequent-flier programme will attract passengers.

Aer Lingus, AA and BA have a similar "service-oriented" rather than price-oriented approach to business.

The report also details Aer Lingus need for capital, arguing that a minimum equity capital requirement of £150 million is necessary to fund the requirements of a strategic alliance.

"Further capital will be necessary to complete the fleet financing programme over the next two to three years, and to ensure that the company is well capitalised to survive a potential industry downturn," the report says.

With the strategic partnership likely to be in place by the start of 2000, passengers - and the Competition Authority - will soon be in a position to monitor its impact on fares.

Some industry observers view airline partnerships as generally good for companies but bad for all customers, except those travelling on business.

"Alliances are not beneficial to the consumer - they reduce the number of flight options," said Mr Philip Molloy, an airline industry analyst with ABN-Amro.

Ryanair, Aer Lingus's main domestic rival, also expressed reservations about the alliance.

"I would question the benefit for the customer in this PR exercise," a spokeswoman said. "If the One World alliance results in a cosy cartel for airlines that want to keep their prices high, that would be of concern to us."

Aer Lingus insisted that fierce competition between the four large alliances would prevent such a development.

Mr Molloy also suggested that with a glut in capacity on European and north Atlantic routes because of the Asian financial crisis, and a doubling in fuel prices, the current climate was less than ideal for an IPO.

"This is not a good time to float - not if you are an airline."