The U.K. Competition Authority yesterday launched an investigation into Europe’s busiest aviation route and its principal operator IAG’s Aer Lingus.
Dublin to London is by far the most frequented route in Europe and is dominated by IAG airlines British Airways and Aer Lingus.
CityJet had been operating its own service into London City but has been changing its model to wet leasing for several airlines, from SAS to Brussels.
It recently signed an agreement with Aer Lingus to stop flying London City in its own right and fly its two RJ85’s in Aer Lingus colours.
In effect this virtually ends much of the Heathrow and London City competition to Dublin, folding it into IAG’s airlines.
The authorities are now monitoring what happens, telling both airlines that any slot manipulation, or diminished competition in pricing will result in 5% fines in their entire companies global revenue. They want to know all schedule changes, pricing and passenger numbers on a weekly basis both in London and Dublin.
The erosion of competition in Europe through large airline groups and joint ventures on some routes is almost out of control. Some routes are dominated by an airline group, others are fiercely fought over – often by bigger low cost airlines who price out smaller ones, which is what effectively ended Monarch two years ago.
Airline groups constantly argue that only large scale allows them to operate at reasonable prices and remain profitable – but aggressive pricing short term nearly always ends up in higher ones as competition drops out, and the airline capable of sustaining the price war longer wins out.