25 JUNE 2012

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Article from BTNews 25 JUNE 2012

COMMENT: Third time lucky for Ryanair?

BTNews is not a fan of Ryanair.  The nickname it has earned with the travelling public is well justified. “The world’s most annoying airline.”  

Michael O’Leary will say that the 76m sector passengers who fly with Ryanair prove that the pseudo Dublin-based carrier (its largest operation is at Stansted) is all the rage, but as with much of the utterings of the Irish deity this is completely exaggerated.  Firstly these are return passengers and secondly he claims that on average people fly on Ryanair five times per year.  That comes down to seven million individuals annually flown by the airline, one tenth of the preposterous claim.

BTNews believes that Ryanair has done a great deal of good in shaking up an industry that was not lethargic, but was indolent.  Sadly, as far as his airline is concerned, he has lowered the tone of the product. 

In 2012 the cost of travelling on Ryanair is usually more than a competitor.  He only really succeeds where for one reason or another Ryanair is solo on the route.   Given the choice most would not fly Ryanair.

Which brings us round to the latest (third time lucky?) Ryanair bid for Aer Lingus. 

Unlike all the analysts and city speculators BTNews thinks that it might just go through.  BTNews does not like monopolies and one would hope for the future that would not happen but Mr O’Leary is very astute and would not have put in the bid without a very good reason.  He is not keen on spending money either.  Dealing with lawyers and city brokers can be very expensive.

If Ryanair were to take over Aer Lingus he could sell the Heathrow slots and possibly turn the former state carrier into a low-cost North Atlantic operation from Stansted, and for the first time offer connectivity with his UK and mainland Europe operations.  He would be an Airbus operator, and be in a predatory position to grab discounted line positions should Airbus or Boeing customers default or cancel.

With regard to the Competition Commission and its European parent a precedent has already been set with the British Airways take-over of bmi.  Routes would clearly come under scrutiny but there are other airlines who might wish to challenge on the UK – Ireland sectors.  Aer Arann currently is in bed with Aer Lingus on certain code-shares but these could very easily be dropped, and with an expansion larger aircraft introduced into the fleet.  The successful Stobart Group has a financial interest in Aer Arann.

The competition people do not always get it right.  People in the West Country will tell you that in spite of objections Flybe was allowed to compete on the Gatwick – Plymouth route resulting not just in the demise of Air Southwest, but the closure of Plymouth City Airport and its ramifications for that city.

Maybe O’Leary’s bid for Aer Lingus was too low?  The Board of the airline seemed to think so. Shareholders, the Irish Goverment and Etihad, have said nothing, but he can increase the offer.  Money talks.  Interesting times.

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