Aer Lingus - 5

[Skipness One Echo]

Obviously O'Leary will be able to create a true low cost base with Aer Lingus

That's far from obvious. It's a legacy carrier with a legacy staff and a legacy attitude that would be poisonous to FR.

if there are passengers out there who want to pay Aer Lingus fares on the same route then there's additional revenue to be made.

This NEVER works in the real world, they'd make a lot more by taking EI out entirely.

Conventional wisdom says EI can't survive outside an alliance. Be careful of conventional wisdom. BMI are part of STAR but as has been commented it doesn't add nearly enough to the bottom line and they pay a hefty premium. EI left oneworld for a sound business reason, it wasn't worth the candle in their current business model.

[racedo]

Well there are a few trivial ones you seem to have cast aside. That's pretty much the major UK market.
DUB-BHX / MAN / NCL / LGW / EDI / GLA

Dub - NCL - FR 2 a day EI 1 a day
Dub-BHX - FR 4 a day / EI 4 a day
Dub - EDI - FR 3 a day / EI 2 a day
Dub- Man FR 4 a day / EI 4 a day
Dub-Lgw FR 6 a day / EI 4 a day
Dub-GLA - different aiports

BHX and MAN they have same rest not.
LGW EI abandoned and only came back in with carrot of doing code share with British Airways which occurs next spring. I've travelled numerous times with BA on the LGW-DUB route and never had a full plane even on Friday evenings where as with FR it has been 90% full.

UK market is important but its 19 flights a day that's it so perhaps some of the UK Centric posters need to consider a bit wider afield.

What synergies exist with Ryanair having two brands on the same city route?

I have said Capital city routes so EI has LHR-DUB potentially EDI-Dub but also FRA - DUB / CDG-DUB and others people wish to pay a premium they can.

You seem to assume that no one else would attempt to offer a competing service......if that was the case they why would anybody launch routes where someone else was there.

[racedo]

I wonder if Heineken's purchase of Beamish and Crawford only to shut them down and take out a competitor will be remembered by the competition authorities. Companies are quite happy to pay good money to asset strip, then remove a competitor.

Heineken bought Beamish and Crawford only as a consequence of buying Scottish and Newcastle, there was no interest in buying them separately as they offered nothing.

Consolidating production on one site was always inevitable......both brands will still exist.

[racedo]

This NEVER works in the real world, they'd make a lot more by taking EI out entirely.

Conventional wisdom says EI can't survive outside an alliance. Be careful of conventional wisdom. BMI are part of STAR but as has been commented it doesn't add nearly enough to the bottom line and they pay a hefty premium. EI left oneworld for a sound business reason, it wasn't worth the candle in their current business model.

Wrong. They would lose the people who happily pay a premium to fly EI even when its trying to offer a low cost service.

Ex Pat population who drive a significant % of US sourced business pay a premium to come EI and renaming gives them an opportunity to go elsewhere. Never disturb the inertia of the people who are loyal to the brand and once you lose them they stay lost.

There are a sizeable % who will never fly FR and there are a sizeable % who will never fly EI.

If you don't think it can be done then just ask a Lexus driver how he like driving a Toyota. Get the brand positioning right and it works but get it wrong it and you waste it.

Whether you like it or not its about Brand positioning and getting the right message to customers about what it stands for........VW/Skoda/Seat are same cars with same floor plan but different finish to appeal to different sets of customers and it works.

BA tried it with GO but lost because they really weren't sure where it fitted with the BA brand.

[lederhosen]

In competition terms Lufthansa is providing some interesting precedents. If all the takeovers are completed then they will own the main players on routes between Germany and Switzerland,Austria and Belgium. They also compete with themselves (Germanwings) on a number of city pairs.

France has also set a clear precedent in terms of having one big player, Air France. It is a considerably bigger market than Ireland. They also dominate routes between France and Holland after the merger with KLM.

Given the spate of mergers in other industries it is certainly not a bad time for Ryanair to be revisiting the issue.

Interesting to note that Aer Lingus has provided the bosses of BA and now Qantas, who incidentally are also talking of merging. Who knows Aer Lingus might even provide a replacement for MOL.

[Bearcat]

I have to say looking at MO'L recently, the man has aged overnight, grey and haggered looking. A good Aer Lingus early morning greasy fry would do him no harm

if O'L gets his paws on AL he by default get his paws on dublin airport as the main tenant which the DAA are certainly not in favour of. The DAA will imo be canvasing the irish govt to not let O'L near AL. FR will be thus the dominant player in the skies and on the ground which from the history of relations vis a vee FR & the DAA/ old Aer Riannta will be vommiting news for the DAA.

In a perverse way which will spit the worst vile and vitriol from O'L , DAA may end up as the stumbling block to this proposed take over.

[840]

Heineken bought Beamish and Crawford only as a consequence of buying Scottish and Newcastle, there was no interest in buying them separately as they offered nothing.

There was a Management Buy Out on the table, but Heineken refused it because by the time they'd disposed of the Beamish site, the difference wasn't that big and it was easier for them to knock out a competitor.

Now apply that to Ryanair and Aer Lingus. Ryanair pay 800 million or so, but get their hands on the Aer Lingus cash,flog the aircraft and the headquarters building in Dublin. At this point, they've made close to their investment back anyway and they get to operate without competition on the Irish market.

Having seen what they did to the Cork-Gatwick route after they forced Easyjet off, I wouldn't like to see that happen to other Ireland-UK routes.

[racedo]

There was a Management Buy Out on the table, but Heineken refused it because by the time they'd disposed of the Beamish site, the difference wasn't that big and it was easier for them to knock out a competitor.

Think there was a bit more than that.

Breweries pay for themselves the more they produce and adding in the B&C products into the Murphys brewery makes it more profitable. Most profitable are the ones with massive production runs but neither brewery capable of this as don't have the volume.

Flogging off EI wouldn't stop anybody entering the market flying into Ireland. The joy of aviation is that the primary assets of the airlines can move anywhere quickly.

[Skipness One Echo]

racedo do you work in motor marketing by any chance and can we see an example of a similar deal IN AVIATION that remains in place when two massively different business models complement each other without undermining ?

It's good for your argument that you dismiss the UK-Ireland market as being only a part of Ryanairs business but the EU see rightly that there will be a virtual monopoly on many of these routes, especially since easyJet were forced out of Ireland. As to BA LGW-DUB, it was an ex CityFlyer Express route that was always too small for the B737, especially now the 300s and 500s are going, so it's going too.

BA tried it with GO but lost because they really weren't sure where it fitted with the BA brand.

No, they discovered they were bleeding passengers from the BA short haul routes at LHR and LGW and GO was diluting focus and yield within BA itself. They were THEN forced to ask where BA sat within the BA brand and so GO was ( rightly I believe ), gone.

[840]

Getting away from the whole Ryanair issue, Aer Lingus has declared the SIPTU deal to be viable

Aer Lingus believes costs deal is viable - The Irish Times - Fri, Dec 05, 2008

[racedo]

can we see an example of a similar deal IN AVIATION that remains in place when two massively different business models complement each other without undermining ?

Issue that occurs is that Airlines buy another to rebrand under their name, state as such at the takeover and stretch existing routes rather trying to build complementary networks. EZY taking over GB Air was Lowcost taking over full service but EZY always stated what their aim was. FR are not stating they wish to kill the EI brand name as they understand its value. MOL is not FR and there is a reasonably strong board behind it.

It's good for your argument that you dismiss the UK-Ireland market as being only a part of Ryanairs business but the EU see rightly that there will be a virtual monopoly on many of these routes, especially since easyJet were forced out of Ireland.

Thats pretty easy overcome as Irish Govt has previously banned EI from using routes to allow FR grow. Similar undertaking can be got as part of the deal that Ryanair will exit certain routes.

As for the BA business from LGW well FR can easily manage the route on a 738 so BA could manage it if they wanted. However given Willie Walsh's background doing a code share with EI is not really a great shock.

[Bearcat]

racedo, I trust Ryanair are paying you good fees to do their PR on this forum....if it f@rts your on.

[racedo]

racedo, I trust Ryanair are paying you good fees to do their PR on this forum....if it f@rts your on.

I want to see a successful Irish Aviation industry and having the 2 companies combined will do that.

Alternate is do nothing and let EI be bought by LH in a couple of years time when everybody declares great we avoid FR and then watches as EI disappears.

Must have missed your solution or is it same old same old that doesn't seem to be working.

[Skipness One Echo]

racedo you seem to have ignored my question. Let me give you a chance to answer the fundamental issue I have as to Ryanair's honesty here :

can we see an example of a similar deal IN AVIATION that remains in place when two massively different business models complement each other without undermining each other?

QANTAS and Jetstar is the only one I can think of and that was a new start built from the ground up. It also remains highly controversial as it seen to undermine Ts and Cs of QANTAS employees. You cite easyJet taking over GB, that's my point. GB is gone now, everything they were has diasppeared and there is no full service offering on many of the routes they served. That is the real Ryanair plan for Aer Lingus, is the right deal for Ryanair and will bring lower fares to some routes. Except it distorts the market, removes competition and will result in Ireland losing her flag carrier and a load of people being let go. It's an asset strip plain and simple.

As for the BA business from LGW well FR can easily manage the route on a 738 so BA could manage it if they wanted

Oh that's priceless. You should write to WW and sort the man out. If only the real world were as simple as yours .

[lederhosen]

What about the Lufthansa and Germanwings model in Germany that I mentioned earlier?

[Count von Altibar]

I'm not EI or FR but to me outside looking on it seems that MOL is going a long way to please the Irish government this time and thus clinch the deal. Airline consolidation is rife and things have moved on from the last failed attempt by the MrOL. I personally think that it's a question of when he gets EI, not if...

[Lord Lardy]

I think the rushed nature of this new bid is to deter a possible forthcoming bid by the Air France/KLM consortium. I think there is a bit to be played out in this yet.

[Skipness One Echo]

What about the Lufthansa and Germanwings model in Germany that I mentioned earlier?

Yes that's a good example. Can't see FR and EI ending up like that though.

[racedo]

GB is gone now, everything they were has diasppeared and there is no full service offering on many of the routes they served. That is the real Ryanair plan for Aer Lingus, is the right deal for Ryanair and will bring lower fares to some routes. Except it distorts the market, removes competition and will result in Ireland losing her flag carrier and a load of people being let go. It's an asset strip plain and simple.

Flag carrier idea is irrelevant as very few flag carrier left across Europe as most no longer owned by the state. Netherlands / Belgium / Austria / Switzerland and soon Spain will have no flag carriers. UK hasn't had one since 1980's when BA sold.

FR has been clear they intend to ensure EI exists. Airline takeovers that have taken place previously have always been clear one name will disappear.

[davidjohnson6]

Apologies if I am less than knowledgeable on this, but what's stopping AF from stepping on this, or even the Irish Govt subtly encouraging AF to make a bid ? Not the best option purely on 'Irishness', but to ensure long term competition in Irish aviation I can't think of a better solution.

Many seem agreed that EI can't remain independent forever, and Irish public opinion may be reluctant to see a takeover by BA (not bad for competition, but not great either). So sell EI to AF. Competition on the UK-Ireland route would increase as BA would be obliged to devote more attention to Ireland, and there would also be plenty of additional connecting long-haul flights at CDG.

Yes, Alitalia will take up a lot of AF's time, but if LH can manage to swallow OS, SN and BD all at once...