Slots are often tradeable assets and are worth a lot of money. This is a contentious issue as giving away too many LHR slots kept BA and AA apart for many years. It's not a trivial matter just to pop a few over the edge to the competition and move on undamaged. The number of slots required to be given up often undermines the business case for bringing the merging businesses together in the first place. Besides the politics of merging flag carriers is political and personal at best
In the case of LHR, IAG holds around 50% of the slots at that airport, even if it merged with LH, IAG/LH will still hold less slots at LHR than AF at CDG and KL at AMS, along with LH (or even IAG/LH) at FRA
Remember also that when you have deal with comeptition wise with London, you have to take account of the other airports in the area, in that respect, LH/IAG is not in any way monopolistic in that respect
Do Ryanair and easyJet fly long haul? Of course not, you're talking about one mega airline in one alliance sewing up major European markets. It would be the mother of all competition issues and quite rightly so.
Well they both fly Short and Medium Haul for a start, in that those markets, it will still be competitive market if a LH/IAG merger ever happened
Also You have to take account of the fact AF/KL will still be a strong player in the Euopean market (even after a LH/IAG merger), after all they are the largest airline in Europe right now, then you have to take account of overseas carriers as well in the case of long haul
So even if a LH/IAG or even LH/IAG/TK merger ever happened, it will not create a monopoly in Europe nor will destory competition, what it will do however is create a leading player in the Short/Medium/Long-Haul markets in Europe
Just an aside, in the very unlikely event of a BA-IB/LH-LX-OS-SN merger being permitted, would the combined entity be Oneworld or Star Alliance?
Or would they be required to remain in separate alliances like the two LANTAM carriers?
LATAM is unlikely to stay in 2 alliances for long (for a start the authories stated that will not be allowed)
It depends which is the best one for LH/IAG, but if it joined Star Alliance, expect more OW carriers to follow...