Ryanair shows Aer Lingus how it’s supposed to be done

Ryanair wants to take over Aer Lingus, which was floated in a fairly whimsical and happy-go-lucky way by the government last week. The unions and the governments are askance – they don’t like the idea of selling the company to Michael O’Leary.

If you ask me this is the result of the triple Irish vices of ignorance, begrudgery and hibernocentricism.

First, a lot of the opposition is ignorant. A lot of Irish people seem to think that Aer Lingus is viable as a small independent business. This is patently untrue. Long haul airlining is an international business for big companies. You have to have scale and route diversity to make it work. Aer Lingus needs a partner and it needs to grow aggressively. It needs to service markets other than Ireland.

There is clear begrudgery. A lot of people disklike O’Leary. Some of this is due to his abrasive attitude, but a lot of it is because he has been too successful. He has turned a small Irish business into an international success. Through opening up routes into the UK and Europe, he has done more in practical terms for Irish tourism and international trade than anybody ever in history. If Tony O’Reilly were taking over Aer Lingus, a deal would be done and there would be a lot less fuss.

A lot of the critics seem to think Ireland is the centre of the universe. I have travelled extensively in Asia, Europe and America and I can confirm that Dublin airport is not the nexus of all human life. There are other airports and other cities and many of them are far more important. Ryanair is a much bigger story than Dublin airport. Ireland is a relative backwater. There is far more to be gained from a strong Ryanair with a long-haul arm than there is to be lost as a result in a reduction in competition in the Irish marketplace.

Of course it makes sense that the competitive status of important routes be protected. This can be easily done, though, by restructuring the ownership of these routes and their slots so that ongoing competition can be ensured. This isn’t a big deal, it just takes some clever planning by the government (which is a major shareholder) and the Competition Authority (which will have at least a limited role in determining how the deal goes through.

Nobody has thought about what will happen if the deal fails. That could mean that Ryanair would dump the shares in the market resulting in a major slip in value. If Ryanair is prevented by union pressure from taking over the airline, it will mean that the whole outfit is basically worthless to investors, since it will be impossible for another player to take over Ryanair.