Govt 'will not sell Aer Lingus shares'
Ryanair boss Michael O'Leary shocked the airline industry today by tabling a €1.48bn offer to buy Aer Lingus, including a plan to snap up the shares held by the Government.
In a statement, the Government insisted it had no intention of selling its stake of at least 25.1% in Aer Lingus.
It said: “The Minister for Finance, Brian Cowen TD, and the Minister for Transport, Martin Cullen TD, have stated that the Government remains fully and firmly committed to competition in aviation markets. It will not sell its shares in Aer Lingus.”
Twenty years after Ryanair began competing with Aer Lingus on the Dublin to London route, O'Leary unveiled a plan for his airline to take over the carrier, which was privatised in a stock market flotation only last week.
Mr O’Leary, who became chief executive in 1993, described the proposed tie-up as a “unique opportunity” to form one strong airline group for Ireland with more than 50 million passengers annually.
Ryanair has acquired a 16% stake in Aer Lingus and made an offer for the rest in a move valuing the carrier at €1.48bn.
The deal would give Ryanair ownership of the Heathrow landing slots of Aer Lingus, although it insisted that both airlines would continue to operate separately and “compete vigorously” on the 17 routes on which they both operate.
Any takeover is expected to go through a rigorous competition inquiry, with one airline analyst forecasting that Ryanair was unlikely to be successful.
The Government still owns around 25% of Aer Lingus after selling down its 85% stake in a listing on the Dublin and London stock markets.
Ryanair said its offer of 2.80 euros a share would realise more than €500m for the Government, while Aer Lingus staff stood to pick up an average of €60,000 from the sale of shares.
The offer is at a premium of 27% on the Aer Lingus share price on the day of its flotation. Ryanair added that its offer was conditional, among other things, on obtaining at least a majority of the shares in Aer Lingus.
In terms of competition issues, Ryanair said there were numerous precedents across Europe for two airlines of similar nationality coming together to form a stronger, more diversified airline group.
A note from ABN Amro expressed surpris at the bid and said at first glance there seemed limited chance of it succeeding.
ABN Amro said: “From a regulatory standpoint, we see huge competition policy issues, with Aer Lingus plus Ryanair having 78% of the Ireland-UK market. We imagine to continental Europe the percentage would be similar or higher.
“Ryanair’s proposal to keep competition between a commonly-owned separately-branded Aer Lingus and Ryanair would not be accepted by competition authorities in Ireland, the UK or the EU in our view.”
The short-haul operation of Aer Lingus comprises 11 routes to the UK and 57 routes to continental Europe. The long-haul network includes up to nine routes to the United States and one route to the United Arab Emirates.
Aer Lingus, which has undergone major restructuring in the wake of the September 11 attacks, also provides cargo services on its fleet of 35 aircraft.
Ryanair operates 750 scheduled short-haul flights per day serving 115 locations in Europe, based on an operating fleet of 107 aircraft.
The company achieved turnover of €1.69bn in the year to March 31, against €1bn for Aer Lingus last year.
