independent

Thursday 17 April 2014

Ryanair's plan to sell Aer Lingus slots 'won't placate' EU

RYANAIR'S plan to sell off most of Aer Lingus's landing slots at London's Heathrow Airport is unlikely to placate EU concerns about the proposed takeover of the former flag carrier, according to industry commentators.

The so-called budget airline is trying to take over Aer Lingus for the third time in a decade. A deal has previously floundered because of competition concerns, and the EU is judging the deal for a second time.

A Ryanair takeover would see the new airline control more than 80pc of flights out of Ireland. In an effort to ease competition concerns, Ryanair is proposing to sell off 20 of Aer Lingus's 24 slots in Heathrow to British Airways and have the UK budget carrier Flybe take on 20 Aer Lingus routes that currently match Ryanair.

The plan is part of a so-called "market remedy" proposal submitted by Ryanair to the EU. It was then circulated to players in the market, such as other airlines and major travel agents.

They are then surveyed for concerns they may have and if they would be prepared to keep operating in such a market.

The plan is said to be an improvement on a previous market remedy Ryanair submitted to the European Commission last month, but industry professionals have reacted with scepticism to the proposal.

The market between Dublin and London is seen as "imperfect", but is a functioning competition between Ryanair and Aer Lingus.

At Heathrow, Aer Lingus competes with British Airways (BA), while at Gatwick Aer Lingus takes on Ryanair. Under Ryanair's proposal, BA would become the dominant player at Heathrow, while the new Ryanair would take on all flights to Dublin from Gatwick.

Warning

Beyond London, the plan for Flybe to take routes across Europe is also seen as unlikely to satisfy the authorities.

In August, Flybe issued a profit warning and said it would cut costs after a weak first half. Its shares are down 26pc this year.

According to market analysts, Flybe is seen as not strong enough to go head to head with Ryanair on any route worth competing on.

"It doesn't have the balance sheet strength to sustain the kind of price war that would be expected if it did try to go toe to toe with them," said one analyst.

Irish Independent

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