| Click for the Finfacts Ireland Portal Homepage |

Finfacts Business News Centre

Home 
 
 News
 Irish
 Irish Economy
 EU Economy
 US Economy
 UK Economy
 Global Economy
 International
 Property
 Innovation
 
 Analysis/Comment
 
 Asia Economy

RSS FEED


How to use our RSS feed

 
Web Finfacts

See Search Box lower down this column for searches of Finfacts news pages. Where there may be the odd special character missing from an older page, it's a problem that developed when Interactive Tools upgraded to a new content management system.

Welcome

Finfacts is Ireland's leading business information site and you are in its business news section.

We provide access to live business television and business related videos from: Bloomberg TV; The Wall Street Journal; CNBC and the Financial Times. Click image:

Links

Finfacts Homepage

Irish Share Prices

Euribor Daily Rates

Irish Economy

Global Income Per Capita

Global Cost of Living

Irish Tax 2008

Climate Change Reports

Global News

Bloomberg News

CNN Money

Cnet Tech News

Newspapers

Irish Independent

Irish Times

Irish Examiner

New York Times

Financial Times

Technology News

 

Feedback

 

Content Management by interactivetools.com.

News : Irish Last Updated: Apr 24, 2009 - 5:31:05 PM


Ryanair makes new bid for its Irish rival Aer Lingus with cash value of €784 million.
By Finfacts Team
Dec 1, 2008 - 8:04:30 AM

Email this article
 Printer friendly page

Ryanair today announced a new bid for its Irish rival Aer Lingus with cash value of €784 million. It already owns almost 30 per cent of the  former State airline.


Ryanair announced its intention to make a Cash Offer of €1.40 per Aer Lingus Share for 100 per cent. of the issued and to be issued share capital of Aer Lingus. Ryanair intends to make this offer through its wholly-owned subsidiary, Coinside. Europe's biggest low-fares airline, already owns approximately 29.82 per cent. of the current issued share capital of Aer Lingus and expects to accept the Cash Offer in respect of these shares.

Ryanair's first bid was in Oct 2006 at €2.80 a-share. It was rejection by the Irish Government, employee shareholders and later, the European Commission.

Ryanair proposes to merge the two airlines into what it termed one strong Irish airline group under common ownership. Similar to previous European airline mergers such as Air France/KLM and Lufthansa/Swiss, both airlines will operate as separate companies, with distinctive brands, thereby preserving the best features of both, including Ryanair’s low fare, high punctuality operations, and Aer Lingus’ special brand, service culture as well as its long haul operations.

Benefits for Aer Lingus Shareholders

The Offer values the entire issued ordinary share capital of Aer Lingus at approximately €748 million. Key features of the Offer are:

  • This is an all cash offer

  • It represents a premium of approximately 28 per cent. over the average Closing Price (€1.09) of an Aer Lingus share for the 30 days to 28 November 2008 (being the last Business Day prior to the date of this announcement)

  • It represents a premium of approximately 25 per cent. over the Closing Price (€1.12) of an Aer Lingus Share on 28 November 2008

Benefits for Aer Lingus and its Employees according to Ryanair

Ryanair has requested an early meeting with the Chairman and Board representatives of Aer Lingus, as well as the ESOT trustees, to explain the benefits Ryanair believes will flow to the Aer Lingus business and its employees from this proposed merger, including:


  • The Aer Lingus ESOT and employee shareholders will receive over €137 million in cash if the Offer is successful

  • A commitment to double the size of the Aer Lingus short haul fleet, from 33 to 66 aircraft over the next 5 years, thereby creating 1,000 new jobs in Aer Lingus during that period

  • Better promotion prospects for Aer Lingus employees through this rapid growth

  • Improved job security as part of one strong Irish airline group

  • Aer Lingus employees will join one of Europe’s Big Four airline groups (Air France/KLM, Lufthansa/Swiss, British Airways Group and Aer Lingus/Ryanair)

  • Aer Lingus employees join an Irish national champion with pan-European network

  • Aer Lingus to remain a separate company and retain its special brand like KLM and Swiss precedents

  • The Aer Lingus Chairman will be invited to join the Board of Ryanair

Benefits for Irish Government and Consumers

Ryanair has requested early meetings with the Minister for Finance and the Minister for Transport to highlight the benefits Ryanair believes will flow from this merger for the Irish Government and consumers including:

  • Ireland will establish one of Europe’s “Big Four” airlines which will be financially strong, as well as managed and headquartered in Dublin

  • Securing Aer Lingus’ special brand, Heathrow slots and connectivity for Ireland

  • Doubling Aer Lingus’ short haul fleet to 66 aircraft and creating 1,000 associated new jobs in Aer Lingus over a 5 year period

  • Irish Government will receive over €188 million in cash if the Offer is successful, which will make a valuable contribution towards current budget spending in areas such as health and education

  • Ryanair’s commitment to growth and lower fares will help the government combat recent declines in Irish traffic and tourism

  • Merged Irish group will have the cleanest, most fuel efficient fleet of Europe’s Big Four airline groups

  • Ryanair’s commitment to cut Aer Lingus’ average short haul fares (€94 in 2007) by 5% for 3 years, generating an approx €40 million p.a. saving for consumers

  • Ryanair’s commitment to eliminate Aer Lingus’ long haul fuel surcharges on completion, generating an approx €100 million p.a. saving for consumers

  • Improve Aer Lingus’ on-time performance to Ryanair’s levels

  • Ryanair secures the Cork and Dublin slots at Heathrow, as well as Heathrow connectivity at lower fares for Ireland

  • Ryanair will upgrade and develop Aer Lingus’ long haul product and service

Ryanair says it believes this Cash Offer provides attractive and certain value for Aer Lingus shareholders. Ryanair believes the Cash Offer is generous in the context of:

  • The collapse in Aer Lingus’ share price from a high of over €3.00 in December 2006 to less than €1.00 in November 2008

  • Aer Lingus’ load factors which have declined by over 7% (long haul) and almost 2% (short haul) in 2008

  • Aer Lingus’ forecast operating losses for 2008 and again in 2009

  • The current airline industry crisis amid the deepening economic recession

  • Declining equity prices

In the opinion of Ryanair, Aer Lingus’ management have failed to deliver on the reasons they articulated in their 2006 defence documents for remaining an independent airline. Since 2006, when Aer Lingus rejected Ryanair’s €2.80 offer, they have:

Spent over €24 million on its defence of Ryanair’s 2006 €2.80 offer
Allowed its director’s basic annual fee to almost treble from €17,500 to €45,000
Allowed its non-executive Chairman’s basic annual fee to increase fivefold from €35,000 to €175,000
Increased short haul fares by 7% to €94
Increased fuel surcharges 5 times to a current average of €75 per sector
Suffered repeated strike threats in April 2006, February, August and November 2007, February and November 2008
Closed its Shannon base in December 2007
Opened a Belfast base in December 2007 which is performing poorly
Ordered new A330 aircraft in 2007 (at the top of the cycle), but then deferred an A330 delivery in November 2008
Suffered short haul and long haul load factor declines in 2008
Forecast operating losses of €20 million in 2008 and another operating loss for 2009

Ryanair said it believes that Aer Lingus is an isolated, uncompetitive, loss making EU flag carrier which has been bypassed by accelerating EU wide airline consolidation. Ryanair believes that Aer Lingus needs to find a strong airline partner to secure its future. Over the past two years, the trading environment for all European airlines has deteriorated dramatically as a result of high oil prices and the global recession. This has triggered a wave of EU airline closures and failures (in all, over 30 airlines have failed this year). In response, pan-European airline consolidation has accelerated as Europe sees the emergence of three large mega-carriers, Air France, British Airways and Lufthansa, and the rapid growth of Ryanair, Europe’s largest low fares airline. So far this year, the following consolidations have been either announced, proposed or are being considered:

Easyjet – GB Airways
ClickAir – Vueling – Iberia
Alitalia – Air One
Lufthansa – SN Brussels
Air France/KLM – VLM
Air France/KLM – Martinair (proposed)
Lufthansa – BMI (proposed)
Lufthansa – Austrian (proposed)
British Airways – Iberia (being considered)
Air France/KLM or Lufthansa – Alitalia/AirOne (being considered)

Ryanair says that today’s Offer provides a financially robust partner, in one strong Irish airline group, within which Aer Lingus will retain its separate brand as well as secure the Heathrow slots and connectivity for Ireland at lower fares.

The Cash Offer, which will be made by Coinside, a wholly owned subsidiary of Ryanair, will be subject to certain conditions set out in Appendix I, including, amongst other conditions, the acceptance by Aer Lingus Shareholders holding not less than 90 per cent. of the issued and to be issued share capital of Aer Lingus (or such lower percentage as Ryanair may determine, subject always to the Takeover Rules), the passing of the Ryanair Shareholder Resolutions at an EGM to be held as soon as reasonably practicable to approve the Cash Offer, and Ryanair obtaining EU Commission clearance or (as the case may be) Irish and other applicable EU member state competition law clearance for the combination of Ryanair and Aer Lingus.

Commenting on the Offer, Ryanair’s Michael O’Leary said:
“This proposed merger of Ryanair and Aer Lingus will form one Irish airline group with the financial strength to compete with Europe’s 3 major airline groups - Air France, British Airways and Lufthansa.

The world has changed dramatically over the past two years, as high oil prices and deep recession have caused a flood of airline bankruptcies, consolidations and capacity cutbacks. Aer Lingus, as a small, stand alone, regional airline has been marginalised and bypassed as most other EU flag carriers consolidate.

Over the past 2 years, the management of Aer Lingus have failed its shareholders, customers and staff. Its shares have fallen from over €3, to less than €1 recently. Fares and fuel surcharge increases have cost consumers over €140m p.a. and repeated restructurings have led to pay cuts and job losses with no substantial benefit as operating costs per passenger have risen by 18% in just 2 years. Aer Lingus is now suffering load factor declines, and has recently announced capacity reductions and forecast operating losses in 2008 and again in 2009.

Ryanair’s merger proposal today offers Ireland a better future by:-

- delivering over €325m in cash to the Irish government, the ESOT and Aer Lingus employees
- guaranteeing that Aer Lingus will remain a separate company with a special brand
- securing Heathrow slots and their connectivity for Ireland at lower fares
- doubling of Aer Lingus’ short haul fleet to 66 aircraft within 5 years, creating over 1000 associated new jobs in Aer Lingus
- cutting Aer Lingus’ short haul fares by 5% for 3 years, saving consumers over €40m annually
- removing Aer Lingus’ long haul fuel surcharges, saving consumers over €100m annually
- creating an Irish national champion in the airline sector with a growing pan-European and transatlantic network
- assuring Aer Lingus’ future in one of the EU’s Big Four airline groups (Air France/KLM, British Airways Group, Lufthansa/Swiss & Aer Lingus/Ryanair)

We have today requested early meetings with the Irish Ministers for Finance and Transport, the Board of Aer Lingus, and Aer Lingus’s ESOT trustees to highlight the benefits for Ireland and all other stakeholders of this comprehensive and valuable merger proposal.”

Related Articles
Related Articles


© Copyright 2009 by Finfacts.com

Top of Page

Irish
Latest Headlines
Ryanair revises up full-year profit guidance
AIB bank profitable in third quarter
Ryanair announces half-year profits up 32% to €795m
Ryanair benefits from improved customer service
Ryanair to buy 100 new Boeing 737 MAX 200
Finfacts server migration Thursday
State-owned Allied Irish Banks reports H1 2014 profit as bad loan charges plunge
Ryanair reports profit in its financial first quarter soared 152%
UK firm opens van dealership in Dublin
Ryanair reports 8% fall in full-year profit; US services to commence in 2019
Global Financial Centres Index: New York overtakes London; Dublin slips to 66 of 83 cities
Bank of Ireland reports “significant” improvement in 2013 results
Sale process of IBRC UK projects Rock and Salt completed
CRH says 2014 will be year of profit growth after reporting 2013 loss
Ryanair reports third-quarter loss
Irish Water says it saved €100m in setup costs
RSA Insurance fires two Irish executives for large loss/ accounting irregularities
Bank of Ireland will have to raise provisions by €1.4bn; AIB says it's "well capitalised"
CRH reports slightly improved third quarter
Central Bank says ownership of Newbridge Credit Union transferred to permanent tsb
Ryanair reports H1 profits rose by 1% to €602m
Dublin Web Summit: Irish Stock Exchange and NASDAQ OMX announce dual listing plan
Irish pension managed funds returned to growth during September
Dan O’Brien resigns as economics editor of The Irish Times
Central Bank says no action required on Anglo tapes revelations
Ryanair flew 9m passengers and Aer Lingus carried 1.1m in August
UK Competition Commission says Ryanair must cut Aer Lingus stake to 5%
CRH reports H1 2013 revenue dip and loss
Vodafone refunded UK after discovery of Irish tax haven deal
RBS reports half year profit; Ulster Bank posts reduced loss
Bank of Ireland cuts pretax losses in HI 2013 to €504m
Irish State-owned Allied Irish Banks reports losses of €758m in H1 2013
Service Announcement
Irish managed pension funds declined in June
VHI reports 2012 surplus of €54.3m; Health insurance made loss
Ex- Elan director says management / board "not competent to run a business"
Aer Lingus to put €140m in employees pensions fund; Ryanair apoplectic
Wednesday Newspaper Review - Irish Business News and International Stories - - May 22, 2013
Tuesday Newspaper Review - Irish Business News and International Stories - - May 21, 2013
Ryanair, Europe’s biggest low cost carrier, announced Monday record annual profits of €569m - - up 13%