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Dublin: 12 °C Saturday 25 May, 2013

Aer Lingus tells shareholders to reject Ryanair offer

The airline says that the reasons for stopping the takeover on competition grounds on now “even stronger”.

Dublin Airport, 2004
Dublin Airport, 2004
Image: Leon Farrell/Photocall Ireland

THE BOARD OF Aer Lingus has urged shareholders to reject the cash offer tabled by Ryanair yesterday, stating it is “not in their interests” and that it undervalues the “robust and profitable” airline.

Disputing claims by Michael O’Leary that the valuation is 38.3 per cent higher than the firm’s capital market capitalisation, the board added that the bid represents a significant discount to the intrinsic value of the business.

According to the directors, the strategy of building a more efficient business is working with operational and financial performances improving greatly over the past three years.

Aer Lingus is a robust and profitable airline with a proven business model, a strong balance sheet and internationally recognised brand. Your board’s unanimous view is that Ryanair’s offer to acquire control of Aer Lingus for €1.30 per share fundamentally undervalues Aer Lingus and represents a significant discount to the intrinsic value of the business.

In a note to the stock exchange this morning, the airline has also argued that Ryanair’s €1.30 per share bid is not “credible” and that it will not be capable of completion on competition grounds.

Yesterday’s formal document posting marks the third time Ryanair has launched a takeover bid for Aer Lingus. A previous offer in 2006 was stopped by the European Commission on competition grounds and Aer Lingus says it has received legal advice that this offer is also likely to be prohibited.

Aer Lingus noted that the UK Competition Commission is still investigating the anti-competitive effects of Ryanair’s current 29.82 per cent holding in Aer Lingus and the legal advice received is that it may have to sell down that stake.

The board believes that if a bid was successful, Ryanair would now monopolise a larger number of routes than if it took over the business back in 2006.

The board has written to all shareholders today outlining its recommendation to take no action in relation to the offer and advising them to not sign any document sent by Ryanair.

If successful in its takeover bid, O’Leary’s airline would continue to manage Aer Lingus as a separate brand and it would operate out of destinations which are still not of interest to Ryanair. The chief executive believes that any objections on competition grounds are unlikely this year because of certain changes in the European aviation market.

The Irish government holds a 25 per cent stake in Aer Lingus but has previously signalled its intention to sell its shares as part of commitments made to the Troika. If it agreed to sell to Ryanair, the State would receive €174 million in cash.

Yesterday: Ryanair makes €694 million bid for Aer Lingus>

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Comments (23 Comments)

  • The main problem with an AL RA merger is that it will end competition on European routes, which would be disastrous for Ireland, which as an island beyond an island is totally dependent on air for links to the EU and beyond. What we need is at least two strong independent airlines competing to keep fares low. The big picture is the tourism and trade benefits of connectivity.

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  • I can’t see how this would be good for Ireland. I would be seriously concerned about the cost of flying to larger airports such as Heathrow or CDG if MOL was calling all the shots. It would be a monopoly plain and simple.

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    • WHat would be point of buying Aerlingus, if they wanted covert it into Ryanair?

      Besides, if they won’t buy it, someone else will. Aealingus is just too small to compete with other giants. And would be nice to keep it in Ireland, wouldn’t ?

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    • Ryanair is only Irish in base! Almost everything else about it is foreign! It’s Irish workforce is minute, it’s largest base is in the UK and its listed on the UK stock exchange so don’t be fooled that it would be buying Irish!

      Also think of the monopoly it would hold resulting in increased cost of flying!

      Personally I would prefer to see Aer Lingus majority owned by the likes of BA, Etihad or similar. Full service airlines which could use Aer Lingus and Dublin as important strategic hubs! Far better for Aer Lingus and the Irish market by far!

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    • The monopoly would be terrible for the consumer unless some stipulations were put in place I doubt that’s allowed though.

      @ Tony , Ryanair is very Irish headquartered in Dublin, with a far from minute workforce , their entire management structure is Irish and they pay their taxes in Ireland . of course their biggest base is the UK the UK has like 15 times our population and Ryanair carry more people than BA.

      The problem I see is I don’t know if anyone else will be able to (or interested in) buying iag/BA wouldn’t be allowed with the Heathrow slots, and any other European airline either already has A massive fleet like luftansa or is losing money hand over fist like Air France /KLM ..

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    • Well said Tony

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  • Don’t forget to mention that AerLingus actually puts you on a plane and not on coach with wings like Ryanair.

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    • Don’t forget ryanair are cheaper

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    • Not by much when you add in all the extras that you have to take into account on a Ryanair flight and the loss of time in actually getting to your destination.

      Leaving that aside there is not way an Aer Lingus/Ryanair deal will be good for this country. We’re constantly trying to stop people having monopolies in media and communications and other areas of public life, why does anybody think a monopoly in aviation transport would be better than competition.

      A merger would also give Ryanair far too much power in its dealings with airport authorities in Ireland. They’d practically be able to dictate their terms because if an aiport didn’t back down they could end up losing both Ryanair and Aer Lingus services. No one company should have that much power

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    • John F 18/07/12 #

      Audrius, Your comment is very childish! Do you know anything about Aer Lingus’ or Ryanair’s Aircraft Fleets? Aer Lingus mostly fly Airbus A320-200s on their domestic routes; Aer Lingus A320-200 can carry 174 passengers (all Economy) every seat has a 30″ pitch and are 18″ wide. Ryanair’s entire fleet is composed of Boeing 737-800 they can accomade 189 passengers and every seat has a 30″ pitch and are 17″ wide. Ryanair have one of the newest aircraft fleets in Europe. I fly regularly on both Aer Lingus and Ryanair. Both carriers charge for checked baggage, for choosing seats, both have credit/debit card charges when booking online, neither offer complimentary in flight food/beverages. Personally I don’t see much difference between either carrier (I think Aer Lingus provide complimentary Newspapers) I much prefer Ryanair because you can show up for the flight 30mins or less before departure so no cueing up to get boarding pass (very convenient for regular Business Travelers). I’ve been refused to check in for an Aer Lingus flight 1hr before it departed because apparently their system doesn’t allow check-ins an hour before the flight, Ridiculous!

      Fleet Detail Source:

      http://www.seatguru.com/airlines/Aer_Lingus/Aer_Lingus_Airbus_A320.php

      http://www.seatguru.com/airlines/Ryanair/Ryanair_Boeing_737-800.php

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    • Aidan, I don’t know how often you fly but Aer Lingus are quite frequently cheaper and they also fly you direct to central airports unlike Ryanair who land in the middle of nowhere. Plus Ryanair get subsidies from the airports and coach companies that they use, so a percentage of the coach ticket you buy goes to Ryanair. All in all, an extra few quid (sometimes) for Aer Lingus will get you to a central location faster.

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  • Aleo 18/07/12 #

    Aer Lingus and Ryanair are not an equal match. If Aer Lingus is to be sold, it should be to another national carrier which, unlike Ryanair, gives professional customer service and full value for the money it charges. That will be better for Ireland in the long run.

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  • AL will need to be sold on. Perhaps it would be better if someone other than Ryanair were the buyers, but unless anyone else is offering to buy, then it seems ridiculous that AL would refuse to sell…

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    • Explain why it “needs” to be sold?

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    • Ben Gunn 18/07/12 #

      If the shareholders like the offer Aer Lingus have to sell. All public companies are always for sale. Thats how the stockmarkets work.nnGivien the various airline takeovers and mergers that have occurred in Europe in the past five years it is possible that Ryanair might get the go ahead this time.nnA more likely scenario is that Ranair’s tactic is to flush out alternative bidders to allow it to offload it’s shares at a reasonable price. Analysts will place a much higher value on Aer Lingus when the defence document is issued. The AL balance sheet carries over €800 million cash. Add to that the net value of fixed assets and the sale value of it’s Heathrow slots and you are up to well over €2 per share. On top of that because AL is profitable you can add a multiple of net annual earnings. nnUnless there are significant liabilities hidden away Ryanair are looking at a value of € 2.50 a share which will give them most of their money back.

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    • Karswell 18/07/12 #

      As Ben Gunn said above, it’s a public company, so it is being traded. Also, the government are now committed to selling their stake, and a proportion of shareholders will piggyback on the sale when it happens.

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  • Birdie 18/07/12 #

    O’leary thinks he is some sort of rebel that that can change the world , pure and simple find out from him about his embargo on recruitment of Irish flight Crew surprised he was wasn’t trying for publicity last week on the back of the PTC episode , then again at the end is where a potential pilot could have come from with his 31,000 euro for the type rating . Hopefully he gets no where close to Aer lingus .

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  • Unfortunately Ryanair will eventually takeover Aer Lingus. It’s inevitable. Eventually Ryanair will increase their offer. But maybe the main share holders at AL don’t want to sell to RA cuz they know how it would end. We all know how it will end. A monopoly would be created. Prices would increase. And the quality of AL would go way way down. Pity Ethihad didn’t follow up on their interests in AL.

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  • Taxi for muller ?

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  • AL needs RA together they only can get better !

    Reply

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