- Title: IRELAND/FILE: Budget ailine Ryanair makes $1.9 bln bid for Aer Lingus
- Date: 6th October 2006
- Summary: (BN10) BRUSSELS, BELGIUM (FILE)(REUTERS) VARIOUS OF RYANAIR CHECK-IN COUNTER CHECK IN ATTENDANTS SERVING FEMALE CUSTOMER CUSTOMER SITTING ON RAIL BAGGAGE ON BELT AND RYANAIR SIGN RYANAIR AIRCRAFT PARKED ON TARMAC WITH SIGN READING "STANSTED" IN FOREGROUND RYANAIR FLIGHT CREW MEMBER CHECKING PLANE BAGGAGE ON BELT PASSENGERS CLIMBING RAMP TO BOARD PLANE VARIOUS OF RYANAIR AIRCRAFT MOVING ON TARMAC RYANAIR GROUND CREW WORKER PASSENGERS DISEMBARKING AIRCRAFT RYANAIR SIGNAGE ON PLANE PASSENGERS DISEMBARKING AIRCRAFT
- Embargoed: 21st October 2006 13:00
- Keywords:
- Topics: Industry
- Reuters ID: LVA936Z91X4KM12DD7ZUBU1Y10ZA
- Story Text: Ryanair, Europe's biggest budget airline, launched a shock bid for Aer Lingus on Thursday (October 5), valuing the former Irish state carrier which listed just four days ago at $1.9 billion.
Ryanair Chief Executive Michael O'Leary, who has long said he has no interest in the long-haul market, said Ryanair and Aer Lingus would be run as separate businesses.
Ryanair revealed it had already bought 16 percent of Aer Lingus in the market and would offer 2.80 euros a share in cash for the rest of the group a 27 percent premium to Aer Lingus's 2.20 euros per share flotation price. The shares closed on Wednesday (October 4) at 2.51 euros.
The budget airline would retain Aer Lingus's staff and management and Aer Lingus would keep its own branding and continue to operate its mixed long-haul and short-haul business but Ryanair said it would help it to drive down costs.
"I think the only significant difference that consumers would notice if the Ryanair offer is successful that fares on Aer Lingus' shorthaul routes will fall each year for the next four years. We understand that the strategy of Aer Lingus' current management is that average fares would rise over the next couple of years so that would be a significant change," O'Leary told a news conference in Dublin.
O'Leary also said if the Ryanair bid was successful, his strategy would be to upgrade the Aer Lingus long haul service.
"Aer Lingus has fallen behind its competitors in recent years. Certainly at the premium end of the cabin where it doesn't have features like beds that kind of thing we think that is the way to develop the long haul product into Ireland. So we would see Lingus actually upgrading the long haul product and reducing fares on the short haul market," O'Leary said.
In turn Ryanair would benefit from Aer Lingus's superior earnings yield, which is better than the returns Ryanair can currently get on its cash deposits.
The government said it would not sell its remaining 28 percent stake but O'Leary told reporters that while he was targeting for at least a 50.1 percent controlling stake he would be happy to have the government, with whom he has often clashed in the past, as a minority shareholder.
Only if Ryanair can get a sizeable holding in Aer Lingus would it delist the company, he added.
Under takeover rules his company can continue to buy in the open market -- at not more than the offer price -- until it reaches a stake of just under 30 percent.
O'Leary said he did not expect to face competition issues over the deal and that Ryanair and Aer Lingus's networks only overlapped on 17 of their combined 500 routes.
Aer Lingus, and its employee trust which holds around 15 percent of the group, were not available to comment and only issued a brief statement over four hours after Ryanair announced its bid, saying it was considering the announcement and would make another statement in due course.
Meanwhile the airline's main union, which opposed privatisation, said the takeover would be bad for Ireland. Ryanair does not negotiate with unions in its own business but said Aer Lingus would be able to operate as at present.
The takeover would create an airline with about 50 million passengers annually, capable of competing with large European airline alliances and groupings like Air France-KLM and Lufthansa-SAS-Swiss.
Ryanair also said its buying power would give Aer Lingus added negotiating strength to buy new planes either from Ryanair's preferred supplier Boeing or from Aer Lingus's usual supplier Airbus. - Copyright Holder: FILE REUTERS (CAN SELL)
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