It is in the consumer interest the government maintains it’s two airline competition policy following the third Ryanair’s take-over bid for Aer Lingus, although Ryanair have stated the landscape has changed dramatically fundamentally since it’s last bid the competitition case against approving the bid is even more stronger than before.
A staggering thirty four scheduled carriers have exited the Irish market through bankruptcy , consolidation & route network adjustment to re-focus on assets on routes where they earn a higher rate of return . The extensive list of scheduled carriers include: Air Southwest, Air Wales, Alitalia, Bmibaby, Blue 1, BMI Regional , Basiq Air, Centralwings, Cimber Sterling, Clickair, CSA Czech Airlines, Cityflier, Easyjet, Estonia Air, Euromanx, FlyLAL, Flyglobepsan, Futura International, GoFly, Hapag Lioyd Express (HLX.com), Jetbird, Luxair, LOT Polish Airlines,Manx2, Malev Airlines, Maersk Air, Monarch Airlines, Regional Airlines, SkyEurope, Spanair, Skyways, Smartwings, Sun Air, Thomsonfly, Tarom Airlines.
Going Forward the case will be compounded as EU Legacy carriers (Air France-KLM, Lufthansa, SAS Airlines) are loss-making in the European short-haul market & re-structuring to restore profitability in this segment which is vital to feed their hubs, as demonstrated by Iberia Airlines establishing a lower-cost production unit Iberia Express to feed it’s Madrid Hub.
Aer Lingus and Ryanair compete directly on 22 city pairs from Dublin notably as opportunities arise for Ryanair to enter primary airports through the bankruptcy of carriers they are competing head to head as the case of Budapest (Malev Airlines) and Barcelona El Prat (Spanair) and indirectly on a further 14 city pairs (Source anna.aero).
Interestingly the Ryanair CEO Michael O’Leary stated in an interview with Bloomberg last September the carrier would fly increasingly to primary airports over the next five years this transformation is underway as seen by the establishment of bases in Budapest, Barcelona and Manchester. I was at Shannon Chamber of Commerce lunch a few years ago where the Ryanair CEO Michael O’Leary stated he would use Aer Lingus to establish a base at Manchester to compete against Easyjet , however Ryanair themselves have now established a base in Manchester.
The likelihood of a viable strong competitor entering the Irish market is very remote as a consolidated Aer Lingus/Ryanair carrier would have dominance of the market as figures revel in Dublin Airport Authority (DAA) 2011 Annual report Cork Airport (84%), Dublin Airport (78%) and Shannon Airport (64%).
This week saw Easyjet announce it will close it’s Madrid Base this winter due to poor returns in a very weak market, it too withdrew from the Irish market in 2006 after a bitter fare war with Ryanair on routes from London Gatwick to Cork, Ireland West Knock Airport and Shannon Airport. GoFly withdrew from the Irish Market after sustaining heavy losses in a fare war with Ryanair on Dublin to Edinburgh and Glasgow in 2002 after six months.
External market factors (Demand, Fuel,Geo-political) will create an ever changing market place, recently a number of high profile CEO’s warned of a very tough winter 2012/3 ahead warning some large carriers could disappear, coped with the on-going EU debt crisis freezing out start-up carriers from entering the market whom won’t have the economies of scale to compete from a small base.
Interestingly the debate has so far ignored the fact that control of Aer Lingus will yield Strategic Aviation assets namely Hangar 6 and the anchor tenant Terminal 2 at Dublin Airport.
Irish Aviation Research Institute © 23rd June 2012
