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| Heathrow from Google Earth |
This week saw another twist in that seemingly never-ending
mating dance Ryanair has been doing to woo Aer Lingus. It seems that Michael O’
Leary and his airline are flinging everything but the kitchen sink of ideas in
their attempt to acquire their fellow Irish carrier and rival. It must be
desperate times because this proposal seems to be the oddest and probably one
of the most controversial. Ryanair are fully aware that their major obstacle in
taking over Aer Lingus is on competition grounds. A merged airline of the two
would have a virtual monopoly on many routes from Ireland but especially on one
of the busiest routes in Europe, that between Dublin and London. Only two other
airlines fly between London and Dublin, the tiny, premium and businessman-orientated
Cityjet flying in to London City Airport and British Airways, which recently
took over the mantle from BMI, the airline they acquired last year.
In their apparent delusion, Ryanair this week stated that to
alleviate competition fears, a potentially merged Aer Lingus and Ryanair would
sell lucrative take-off and landing slots owned by the former at Heathrow to other
airlines such as Virgin Airlines. Virgin Airlines has been developing a
stronger emphasis of feeding passengers through its Heathrow hub for long haul
destinations, announcing new routes from the London airport to Manchester this
week and would with relish snapping up the slots if they were to come up for
sale. It is probably the opinion of Ryanair that this may incentivize Virgin to
open a new route to Dublin as it has done with Manchester and allow the Aer
Lingus Ryanair hybrid to concentrate on the low cost model both Irish airlines espouse
and alleviate fears of a monopoly on the Dublin London route.
The problem with this proposal is that it ignores the
strategic value for the country and the state as major shareholder in Aer
Lingus of owning slots, the third most of any airline in one of the world’s
most important airports. Indeed in the preliminary process of privatizing the
former state airline, the Fianna Fail led government at the time even
considered creating a separate holding company to keep the landing slots in
state hands, such was the importance of the landing slots considered at the
time. With Heathrow running close to 99% capacity and debates about its
expansion, landing slots at Heathrow coming on the market are extremely rare.
The only few times in the past few years that slots have been up for trading
have been due to competition rulings to prevent a dominance of one carrier in
the international hub. This has been the case with IAG, British Airway’s parent
company and largest owner of slots after the airport’s acquisition of BMI, the
second largest last year. For this reason, the importance and value of the
slots and the effect of selling them should be considered off the table.
Ryanair has consistently stated that it intends to run the
two airlines as separate entities with Aer Lingus concentrating on long haul
and certain short haul routes. If that is the case, it seems to be at odds with
selling slots at an airport primarily dedicated to that. Just as Virgin and
other airlines use Heathrow to feed passengers through it on long haul routes,
there is a compelling business opportunity for Aer Lingus to keep the slots,
whether or not it is acquired by Ryanair. It is also vital at retaining that
feed for international business people who would balk at switching airports in
London to get to Ireland. While Ryanair has said it does not intend to sell all
the slots, reducing capacity in an increasingly globalized world in which hub
airports like Heathrow are vital routers does not make sense.
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| Stansted |
This could all be a game by Ryanair for ulterior motives.
Ryanair also this week mooted taking a controlling stake or buying out totally
its London hub Stansted. Stansted is finally coming on to the market after BAA,
who also own Heathrow gave up its three year legal battle to retain it. It was
forced to sell it, ironically for Ryanair by a ruling from the Competition
Commission who found that BAA had an unfair monopoly on airports in the London
area. Ryanair will have rivals in its mooted plan to take control of the
airport in the shape of Qatar Holding and Manchester Airport Group. It seems
that both issues are based around a desire to concentrate on its own existing
hub of Stansted at the expense of Heathrow, which it finds quite rightly an
obscenely expensive airport to operate from.
The selling of slots at Heathrow seems to be a misguided
offering for one of the entities that holds the biggest obstacle to Ryanair
acquiring Aer Lingus, the UK Competition Commission who have been investigating
Ryanair for quite some time. The
selling of the slots, even a few would be a bad decision for the future of a
merged company and the country. It smacks of exasperation from Ryanair in its
third attempt at acquiring its Irish rival.
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