Fly_bill
This has been the exact problem for Aer Arann
They claim to be in difficulties now as a result of volcanic ash but reality is that losses have been mounting for last couple of years and I would say it all started to sour when Ryanair challenged them head on between Dublin and Cork, they waged a long battle in which neither made any money I would imagine Aer Arann lost stacks.
Love them or hate them, but Ryanair has been very predatory towards Aer Arann and at some point it was a relentless string of attempts by Ryanair to wipe them out.
Cork - Dublin
Dublin - Kerry (gaining PSO on reduced grant)(also pitching PSOs lower €)
When Gill Air went bust Aer Arann were to commence Dublin Newcastle but Ryanair jumped in instantly.
Many routes ex Galway by Aer Arann were targeted by Ryanair at Shannon (also challenged Aer Arann services ex Cork) including from memory.... Edinburgh, Luton, Leeds/Bradford, Liverpool (RE did GWY LPL at some point?), Bristol. Ryanair even did Dublin Shannon which may arguably been some challenge to Dublin Kerry and Dublin Galway.
Moreover, I feel a combination of the Challenge by Ryanair on DUB ORK & Loss of KIR route (70% of problem), General downturn in domestic flying in Ireland (20% of their problems and finally the volcanic ash issue.
It is ironic that when Ryanair were on their knees in the early 90s/kate 80s when they went to the minister for transport, they were given a life line by him that gave them protection from Aer Lingus by giving exclusivity on Dublin to LPL, MUC & STN.
Shame the same dispensations couldnt have been made for RE in the past.
EI-BUD