RYANAIR CHIEF executive Michael O'Leary formally launched his company's €748 million bid for rival Aer Lingus yesterday claiming the deal would be good for the State and the former State airline.
Ryanair owns close to 29.8 per cent of Aer Lingus and is offering €1.40 a share for remaining 70.2 per cent. This values the company at €748 million, puts a price tag of €188 million on the State's 25 per cent stake and €137 million on the workers' share.
Aer Lingus subsequently rejected the offer, arguing that it "significantly undervalues" the airline and warning that a deal would create a monopoly of air transport to and from Ireland.
Mr O'Leary pointed out that the price which his company is offering for its rival is a 25 per cent premium on its value on November 28th, the day before Ryanair announced it was planning a bid.
He argued that the price is significantly higher than the levels at which Aer Lingus was trading last month. "Let's put it another way, where would the Aer Lingus share price be if we were not making an offer?" he asked.
He added that the company's share price has fallen from €2.80 in October 2006, when Ryanair launched its first bid for Aer Lingus, to €1.09 last month. He claimed that, in that time, the airline had closed eight routes and increased fares by 7 per cent. The Ryanair chief executive said that if the deal is done it will run Aer Lingus separately, maintain the brand and guarantee its Heathrow slots, which are seen as a vital connection between Ireland and many international destinations. Ryanair says it will create 1,000 jobs by doubling its rival's short-haul fleet. Ryanair also intends cutting Aer Lingus short-haul fares by 5 per cent on average for three years, which it estimates will save consumers €40 million a year. It has backed this up with a €100 million bank guarantee.
Mr O'Leary stressed that remaining independent was no longer an option for Aer Lingus, and said consolidation was the order of the day in the European and global aviation industries. Mr O'Leary predicted that, ultimately, Europe will have four airlines, Ryanair, Lufthansa, Air France/KLM and British Airways.
"There is no future for a small, regional airline like Aer Lingus," he said, and added that if Ryanair's bid succeeds, the airline would become part of one Europe's "big four".
He added that Aer Lingus effectively acknowledged this when its chairman, Colm Barrington, told The Irish Times last week that the company would seek a friendly investor to take a majority stake in the airline to prevent Ryanair from bidding again.
However, he argued that if one of the other three players bought Aer Lingus, they would take the Heathrow slots and the company would no longer have an Irish headquarters.
Mr Barrington last night said Ryanair's formal offer document contained nothing new. "It is the usual stream of invective, spin and misrepresentation that we expect from the people at Ryanair," he said.
