Gabrielle Monaghan examines the possible repercussions for Irish passengers of a Ryanair takeover of Aer Lingus. Would it lead to lower fares or second class service?
Scrambling for seats once the aircraft doors open, arriving at airports miles away from civilisation in the middle of the night, dirty seats, and a "talk to the hand" style of customer service. Is this the fate of the Irish travelling public if Ryanair succeeds in its hostile bid for Aer Lingus?
About 70 per cent of the passengers travelling through Dublin Airport fly with either Ryanair or former State monopoly Aer Lingus. Consumer representatives and opposition parties are concerned the combination of the two carriers into a single dominant airline would leave air travellers with no choice but to fly with a "yellow-pack" airline.
"Low cost is not the only element for consumers when they decide who to fly with, which is why so many choose to go with Aer Lingus instead of Ryanair," said Dermott Jewell, chief executive of the Consumers' Association of Ireland.
"It has to be pointed out that there are problems with Ryanair's customer service." Opposition parties yesterday described the proposed takeover as a "disaster" for Irish aviation and consumers alike and called on the Government to use every means possible to prevent the transaction.
"Air access to Ireland has increased and airfares decreased on the back of the competition that existed between these two companies. Irish consumers would be the first to loose out in any merger," said Eamon Ryan, the Green Party's transport spokesman. "This deal may make sense for Michael O'Leary but it makes the Irish government look like complete fools."
The Government, which currently owns 28.3 per cent of Aer Lingus, said it will not sell its shares in the flagship airline. Minister for Finance Brian Cowen and Transport Minister Martin Cullen stated that the Government remains fully committed to competition in the aviation market.
"No one wants to go back to the dark days of a single major airline," said Olivia Mitchell, transport spokeswoman for Fine Gael. "In the meantime, the Dublin Airport Authority should actively seek business from other airlines in order to reduce our reliance on the two major players whose interest may not necessarily coincide with the national interest."
Ryanair insists that a takeover would not spell an integration of Aer Lingus into Ryanair, since the national airline would keep its own brand and continue to execute its current business model. However, experience has shown that this rarely happens. When Austrian Airlines bought smaller domestic rival Lauda Air in 2002, the dominant carrier pledged to retain both brands. Although Lauda Air still has its own website, the brand is gradually dropping off the radar.
"Considering Ryanair's management structure and corporate strategy, I think they would be determined to impose some of their structures and strategies on Aer Lingus and that's not unreasonable," Mr Jewell said. "Some of the changes may be positive but undoubtedly some changes may not be in favour of the consumer."
Ryanair chief executive Michael O'Leary has said the no-frills carrier would reduce fares at Aer Lingus and be able to acquire planes at a lower cost by combining orders. Indeed, he promises to cut Aer Lingus' average short-haul fare of €87.55 in 2005 by 2.5 per cent a year for at least four years, or 10 per cent in total. Mr O'Leary says Ryanair's average fare is €40, though the carrier does not yet fly transatlantic routes.
The discount airline has trimmed its costs to the point where it can almost give away seats. Ryanair makes its profits on extras such as the various charges added to fares, food and drink, insurance, and even premium rate phone lines.
Fares on Aer Lingus flights have also dropped in recent years because the once cash-strapped airline has already gone some way towards stripping out the extraneous costs associated with the traditional national carrier.
While more than 500 routes would be on offer if Aer Lingus was swallowed up by Ryanair, they currently compete on just 17. Mr O'Leary pledged to maintain the frequency of flights on those routes and said he expected fares for those flights to decline over time.
"If Ryanair's purchase of Aer Lingus results in increased efficiency, more routes and reduced prices, then this is a welcome development," said Dan Loughrey, chairman of the Air Transport Users' Council (ATUC), a policy council of Chambers Ireland that represents business as a consumer of air services.
The ATUC, though, is concerned about Ryanair's statement that it has no interest in taking a position on the board of Aer Lingus.
"This is a curious one," Mr Loughrey said. "How can Ryanair protect its investment, let alone 'expand, enhance and upgrade Aer Lingus' operations' and 'reduce costs through improved efficiencies' without representation on the Aer Lingus board?" The surprise bid was also greeted warmly by other business interests. Ulster Bank Group chief executive Cormac McCarthy told accountants at a luncheon in Dublin yesterday he thought a successful takeover would be "fantastic". "Aer Lingus would be a better business for it," he said. "I'm a greater believer in the free market."
