BA, KLM link up a threat to some Ryanair routes

Ryanair has claimed that the "low fare" services owned by British Airways and Dutch carrier KLM could drive it from certain routes if the proposed merger of the two airlines goes ahead.

Its chief executive, Mr Michael O'Leary, said the EU may require British Airways to sell its low-fare subsidiary, Go, and KLM to sell its counterpart, Buzz, if the proposed link goes ahead.

Recent reports, quoting a senior EU official, have suggested that this could be a condition for the union's approval of the proposed deal.

In an article published in yesterday's Wall Street Journal Europe, Mr O'Leary also wrote that Ryanair would ask the European Commission to require "any merging airlines" to surrender landing slots at Stansted airport, London, or other airports where both carriers were present.

The proposed deal would create the largest low-fare subsidiary of the largest carrier in Europe if the merged airlines combined Go and Buzz, Mr O'Leary said.

Yet EU rules strictly prohibit cross-subsidisation and predatory pricing. This could lead the EU's competition commissioner, Mr Mario Monti, to require the merged entity to sell Go and Buzz, he wrote.

"Many analysts say that a key part of the rationale for the proposed merger between BA and KLM is to shift its low-margin business to its Dutch would-be susidiary."

He continued: "With BA and KLM's deep pockets to tap, these low-fares units could sell tickets at a loss in order to drive carriers like us, with no rich parent to call on, from certain air routes."

Mr O'Leary, who has filed a complaint with the European Commission alleging that the German carrier Lufthansa was engaged in predatory pricing on its routes from London to Frankfurt and Hamburg, said fears that "mega-airlines" would abuse monopoly positions were not just theoretical.

A further fear was that larger carriers would move into and monopolise landing slots at secondary airports, such as Stansted, in which Ryanair has based much of its business.