The issue for Aer Arann is not just that the PSO would be withdrawn which would be an issue to some extent, but the real issue I can see is that the regional airport will be over reliant on Aer Arann and as such may need to increase their charges in effect making the viability on these routes more difficult.
Take Galway or Waterford which are big operations on the scheme of things for Aer Arann, when the airport had limited income how will this impact their cost base and in turn Aer Arann's costs?
Does this spell the end of the proposed Runway extentions at Galway and Waterford so hence no chances of Ryanair coming in in the future???