Ryanair likely to ditch acquisition as futile strategy

Different year, same result for Ryanair in its attempt to take over Aer Lingus.

Michael O’Leary’s “unprecedented and revolutionary remedies package” to get a deal across the line failed to impress the European Commission, which yesterday formally rejected Ryanair’s latest takeover attempt just as it did in 2007.

Ryanair blustered yesterday about appealing the commission’s decision but its chances of success seem remote.

It failed to overturn the 2007 ruling on appeal.

An appeal would spin this out for an indefinite period, which would be unhelpful to Aer Lingus, given that it would have to keep a team of advisers to shadow Ryanair’s legal moves.

Attention will now switch to whether the UK Competition Commission moves to force Ryanair to divest of its 29.8 per cent shareholding in Aer Lingus.

UK investigation

The UK commission’s investigation began following a referral by the Office of Fair Trading on June 15th last year but was put on ice when Ryanair launched its bid just four days later.

It wasn’t clear last night if, in the event that Ryanair does lodge an appeal to the European Commission’s decision, the UK body would be able to proceed with its investigation or whether it would have to await the outcome of such a challenge.

Aer Lingus has racked up many millions of euro in costs defending itself against three Ryanair takeover bids – O’Leary pulled the plug on his 2009 offer before Brussels had the chance to consider the matter – and would prefer if the whole thing just went away.

The ripples from this latest bid by Ryanair will last for some time.

Aer Lingus was not impressed that its former chief executive Willie Walsh and his International Airlines Group/British Airways were such willing partners to Ryanair’s takeover bid.

Aer Lingus and BA have a long-standing code-sharing deal that is bound to be soured by the fact that the UK airline was such an eager participant in O’Leary’s takeover attempt.

Ryanair offered to give up certain routes to London from Irish airports to BA and 43 of Aer Lingus’s short-haul routes to British regional carrier Flybe, which was also to get €100 million in capital to help launch a new business in Ireland.

Ryanair would have taken over the balance of Aer Lingus’s routes, including its long-haul business to the US.

Fewer options

“In the end, the most likely outcome of this transaction would have been quite simple: when flying to and from Ireland, passengers wouldn’t have been able to choose between as many options as they can today, and they would have ended up paying higher fares,” was how commission vice-president in charge of competition policy Joaquín Almunia summed up the proposal yesterday.

For Ryanair, the focus might now turn towards landing a new aircraft deal with Boeing. If it can’t grow by acquisition then it will just have to do so organically.

Losing out on Aer Lingus is undoubtedly a setback for O’Leary, but it’s far from the end of the Ryanair growth story.