February 7 2013

The Daily Business Post in Ireland reports that British Airways has reached a formal agreement with Ryanair on taking over certain Aer Lingus routes in the event that Ryanair is successful in its takeover bid for the Irish flag-carrier.

The agreement is reported to involve flights between London & Dublin, Cork and Shannon and is similar to a concurrent agreement that Ryanair is said to have reached with FlyBe. Both deals will only go ahead if Ryanair is finally successful in its attempt to take over Aer Lingus; after two previous failed attempts, you wouldn’t want to bet your house on it.

 With Aer Lingus & Ryanair dominating the Irish market, the European Commission has so far taken a pretty dim view on a merger between the two airlines and it remains to be seen whether the aforementioned deals will do anything to assuage their competition concerns.

 In addition, Aer Lingus requires the approval of 75% of its shareholders before it can sell of its prized slots at Heathrow; with the Irish government holding some 25% of the airline’s shares, and a long time opponent of any merger, it is hard to see a successful outcome.

 If the deal was to go through, the attraction for British Airways is clear – several more slots at capacity constrained Heathrow. However, as British Airways was forced to part with 14 sets of slots following its takeover of bmi in 2012, there must surely be a question as to whether the UK competition authorities would allow such a deal to pass unchallenged.

British Airways Heathrow base