Aer Lingus off to a flyer as Ryanair bids £1bn
Ryanair has tabled a shock £1 billion all cash bid for rival Irish low-cost airline, Aer Lingus, just three days after the Dublin flyer commenced unconditional stock market dealings.Europe’s largest low fares airline has already taken a 16 per cent stake in the Dublin airline and has offered to acquire the balance at €2.80 per share, valuing Aer Lingus at €1.481bn (£997m) and representing a premium of 27 per cent over last week’s IPO share price.
Though the bid proposes the two airlines continue to operate independently, Ryanair said the acquisition would eventually give the collective group the necessary muscle to take on the world long-haul sector. Aer Lingus already has several well-served destinations across the USA as well as a regular flight to Dubai.
Ryanair also said it would bring Aer Lingus’ average short-haul fare (€87.55/£58.96) by 2.25 per cent a year for at least four years.
Michael O’Leary, Ryanair’s chief executive, said: “This offer represents a unique opportunity to form one strong airline group for Ireland and for European consumers. We will expand, enhance and upgrade the Aer Lingus operations.
“This offer – if successful – means both companies will continue to operate separately and compete vigorously in the small number of routes on which we both operate – currently around 17 of the approximately 500 routes operated by the two airlines.
“We believe the price of €2.80 to be an excellent offer. If accepted the Irish Government will realise over €500m (£337m) from the sale of their Aer Lingus shares, and the employees will realise over €220m which equates to an average of over €60,000 (£40k) per employee.”
In Ryanair’s release to the stock exchange release, the airline also pointed out that an acquisition would provide an Irish managed and headquartered airline group capable of taking on its European and world competitors “well into the future.”
It added that as an island nation, Ireland was critically dependant upon strong and secure low fare airline services in order to sustain and develop tourism and economic growth. Investing in Aer Lingus is attractive for Ryanair and its shareholders because, amongst other things, Aer Lingus’ earnings yield is superior to the returns currently available on Ryanair’s cash deposits.
Ryanair said through the acquisition it also intended to:
• Reduce Aer Lingus’ fuel surcharges as the price of oil falls from recent highs;
• Retain the Aer Lingus brand;
• Retain the Heathrow slots;
• Retain all profitable routes currently operated by Aer Lingus;
• Reduce Aer Lingus’ costs through improved efficiencies and Ryanair’s superior purchasing power;
• Give Aer Lingus access to the benefit of Ryanair’s lower cost aircraft deliveries and lower cost financing facilities;
• Upgrade Aer Lingus’ transatlantic fleet and improve its long haul product;
• Maintain Aer Lingus as a stand alone, separate company within one strong Irish airline group under common ownership but run as separate competing airlines.
The combined group would establish an Irish airline group with over 50m passengers annually, which Ryanair believes is capable of competing on the European and World stage against other large European airline groups, including Lufthansa /SAS/Swiss (75m passengers), Air France/KLM (70m passengers) and BA/Iberia (63m passengers).
Ryanair added that if the acquisition were to proceed, it would largely replicate previous consolidations in, for example, France (Air France/Brit Air/Regionale/KLM), UK (BA/B.Cal/DanAir/City Express), Germany (Lufthansa/Eurowings/Lufthansa Cityline/Swiss) and Scandinavia (SAS/ Braethens).