Aer Lingus says agreement on Ryanair connections possible by next year

* No reason why feeder plan can't be struck- IAG CEO

* Ryanair considering connections for first time

* Aer Lingus to fly three new U.S Routes, more in 2017 (Adds transatlantic expansion, IAG CEO quotes)

By Padraic Halpin

DUBLIN, Oct (HKSE: 3366-OL.HK - news) 21 (Reuters) - Aer Lingus is in talks with short-haul carrier Ryanair about transfer connections for markets it does not serve and an agreement could be reached by mid-2016, Chief Executive Stephen Kavanagh said on Wednesday.

Kavanagh gave the update as Aer Lingus, which was bought by British Airways (BA) and Iberia owner International Airlines Group (IAG) last month, announced three new U.S (Other OTC: UBGXF - news) routes for next year and outlined plans for further expansion in 2017.

"We are looking at the opportunities to extend our network reach. There are markets that Ryanair serves that we don't, so we are having those discussions about what is currently happening on an ad hoc basis," Kavanagh told reporters.

"If we get the right price in terms of the capacity from Ryanair, then we would be very interested in doing business. If the commercial agreements are reached in time, then summer 2016 is a possibility."

IAG Chief Executive Willie Walsh said that with Aer Lingus and Ryanair customers already "self-connecting", as passengers of U.S. airline Jet Blue were doing before it struck up a partnership with Aer Lingus, he did not see any reason why the rivals should not create a better, seamless proposition.

Ryanair CEO Michael O'Leary told Reuters in August that he had spoken to a number of airlines including BA and Aer Lingus about providing connections for long-haul services for the first time, marking a major change for how Europe's largest low-cost carrier operates.

Ryanair agreed to sell its 30 percent stake in Aer Lingus earlier this year as part of the IAG's plan to buy the Irish airline and build a new transatlantic hub at Dublin airport, adding more lucrative flights to and from North America.

Aer Lingus will fly to Newark in New Jersey, Los Angeles and Hartford, Connecticut from next year, in what it called the biggest expansion of its nearly 60-year old transatlantic network that increases its number of routes to 12 from nine.

"Building a hub is critically dependent on the number of routes. We will follow quickly the 2016 initiative with more expansion in 2017," Kavanagh said

"It (Other OTC: ITGL - news) may be that we will add new routes, as we have today, but I would certainly see an opportunity to grow existing gateways and build frequencies. We will build a scale of the operation but I would see that as a balance between new and existing." (Reporting by Padraic Halpin; Editing by Tom Heneghan)