Monday 23 July 2018

Aer Lingus goes head-to-head with Ryanair in fight for Europe's skies

Ryanair CEO Michael O’Leary
Ryanair CEO Michael O’Leary
John Mulligan

John Mulligan

Aer Lingus owner IAG is going head-to-head with Ryanair as it launches its low-cost carrier Level from Vienna next month.

It marks further intensification of competition within Europe's aviation market, and will increase pressure on Ryanair to deliver returns for its shareholders from its investment in Austria-based airline, Lauda Motion.

It also pitches two of the world's best-known aviation bosses, Irishmen Willie Walsh and Michael O'Leary, against each other in a battle for European skies.

Until now, Level had focused on low-cost, long-haul services from Barcelona and Paris to destinations in North and South America, and the Caribbean

Earlier this year, Ryanair acquired an initial 24.9pc stake in Austria's Lauda Motion, and is waiting for EU approval to increase it to 75pc. It recently signed an option to buy all of Lauda Motion in four years' time.

Ryanair has previously stated that it expects Lauda Motion to be profitable within three years and to eventually have a fleet of at least 30 aircraft. It currently has four based at Vienna, but has also opened bases at Berlin's Tegel airport and in Dusseldorf. It also has aircraft based at other German airports, and has also planned to base jets at Zurich. IAG, whose boss is Mr Walsh, said Level will have four Airbus jets based in Vienna and start flights on July 17. It will serve 14 destinations in Europe, some of which are also served by Lauda Motion, such as Ibiza, Palma, Larnaca and Malaga. Lauda Motion is already serving about double the number of routes as Level will from Vienna.

Read more: Comment: Turbulence ahead as Level takes off

Ryanair, headed by Mr O'Leary, is initially investing close to €100m in Lauda Motion. That includes the price for the 75pc stake and €50m in working capital. Lauda Motion, which is chaired by Formula One racing legend Niki Lauda, was formed from the Niki airline that collapsed last year along with its parent, Air Berlin.

Mr Lauda gazumped IAG and Lufthansa to seize control of Niki, with its assets acquired by Lauda Motion.

Lufthansa had terminated its interest in buying Niki due to competition concerns flagged by Brussels.

IAG had announced last December that it had agreed to buy Niki for €20m. But the plan collapsed when Mr Lauda muscled in to snatch the Niki assets from under IAG's nose.

Irish Independent

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