Aer Lingus remains hopeful of divorcing Ryanair

The Aer Lingus flight plan is now firmly focused on the US. It has just inaugurated its Dublin-San Francisco route, which will become a daily service at the end of next March.

The airline has also resurrected a route to Orlando (that was scrapped in 2005 due to disagreements with flight crew), and introduced a Dublin-Dulles schedule. All this is likely to be at the expense of the Dublin-Dubai route, which could be canned by early next year.

While all this route expansion is underway, Aer Lingus boss Dermot Mannion seems adamant that Ryanair, which now owns almost 30% of Aer Lingus, will still be forced to divest at least part of its stake at some stage in the future.

During the summer the European Commission blocked Ryanair’s plan to acquire Aer Lingus, saying that such a move would create a near-monopoly of air services within Ireland.

Aer Lingus subsequently moved to force Ryanair to sell its stake, but the European Commission said last month that it had no power to force the low-fares carrier to off-load the holding.

Aer Lingus is now appealing that decision to the Court of First Instance, and a ruling will probably be made by next year.

Speaking to the San Francisco Chronicle this week, Mannion said that “we are hoping that over time, because of the competitive strains between the organisations, they [Ryanair] will have to reduce their shareholding because we don't think it's healthy for one major competitor to have 30%”.

And serving as a backdrop to all this is the Aer Lingus-Shannon debate.

A sad fact of life it may be, but those campaigning for Aer Lingus to retain its London Heathrow route would be better expending their energy at playing to Shannon’s strengths, rather than fighting what will be, and should be, a losing battle.

That Aer Lingus is no longer state-owned seems to have been lost on those arguing for the route to be maintained. A publicly-quoted company, or a private one for that matter, can not afford to continue loss-making services. That’s especially true in the aviation industry, where soaring fuel costs, and in the case of Aer Lingus, high labour costs, mean it has to keep a tight rein on things.

Any external geo-political shock could drive the aviation industry into a steep decline, as did the events of 2001. Even without such a catalyst, it’s a notoriously cyclical business. One where in tough times, it might be good to have a rich sugar daddy, even if you don’t like sleeping with them.

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http://www.independent.ie/business/irish/aer-lingus-confirms-plans-to-challenge-ryanairs-stake-1139520.html

http://www.iht.com/articles/2007/06/27/business/ryanair.php

http://www.rte.ie/news/2006/1005/aerlingus.html

http://www.rte.ie/business/2006/1005/ryanair.html

http://www.rte.ie/news/2005/0511/6news.html

http://www.reuters.com/article/innovationNews/idUSL1461792320070514