Bloomberg News

Ryanair’s O’Leary Ready to Drop Crossover Aer Lingus Routes

September 04, 2012

Ryanair Holdings Plc (RYA) could exit all 46 routes from Dublin that overlap with Aer Lingus Group Plc (AERL) to help win approval for a takeover bid and said it’s talking with more than 10 carriers about selling or leasing the slots.

“We have really revolutionary, radical remedies, so we think it should be and will be approved,” Chief Executive Officer Michael O’Leary said today in London. A similar bid from Ryanair was blocked by the European Commission five years ago.

Ryanair has also been approached by groups bidding for BAA Ltd.’s London Stansted airport, the carrier’s biggest base, after indicating it might be prepared to take a stake of as much as 24.99 percent, O’Leary said at a press conference.

European Union regulators last month began a full probe of Ryanair’s 694 million-euro ($873 million) bid for Aer Lingus, in which it already has a 29.8 percent stake. An initial examination showed the two airlines were direct rivals on a large number of European routes, the EC said Aug. 29.

Ryanair, Europe’s biggest discount airline, would withdraw Aer Lingus planes from the Dublin-London Heathrow route, freeing up room for network operators such as Virgin Atlantic Airways Ltd. and International Consolidated Airlines Group SA (IAG)’s British Airways to fly to Dublin, O’Leary said. Slots could also be made available at Paris Charles de Gaulle, he said.

‘No Interest’

In many cases, the Irish carriers offer similar trips using different airports. Ryanair flies between Dublin and Stansted, while Aer Lingus favors the long-haul links of Heathrow, a hub to which O’Leary said he has “no interest in flying.”

Ryanair hasn’t talked about its bid with other Aer Lingus shareholders, including the Irish government, which is planning to auction its 25 percent holding, or Etihad Airways, which owns 3 percent, O’Leary said.

“The real danger is that our package is so radical that they may block it because they might find difficulty getting another merger through,” he said.

Ryanair fell 1 percent to 4.16 euros, paring the advance this year to 15 percent. Aer Lingus rose 0.3 percent to 1.053 euros, for a gain this year of 66 percent.

European Commission regulators set a Jan. 14 deadline to rule on the Ryanair bid. The offer has lapsed and O’Leary says he’ll re-bid if the EU approves the deal.

Stansted Revival

Aer Lingus has said that reasons for preventing a takeover are “even stronger than before” because it competes on more routes to and from Ireland than it did five years ago. Irish politicians have also criticized the takeover approach.

EU regulators blocked Ryanair’s bid for Aer Lingus in 2007 saying a combination would allow the discount airline to dominate 35 routes and control 80 percent of the market in Dublin. Ryanair lost a 2010 appeal of the merger ban.

At Stansted, O’Leary said a buyer should be able to revive passenger numbers that have fallen for the past five years in contrast to airports including Heathrow, Edinburgh, Glasgow and Birmingham within four or five years by cutting charges.

London Mayor Boris Johnson’s plans for a new London airport in the Thames estuary are “pie in the sky, dreamed up in a pub on a Friday night,” O’Leary said.

The simplest solution would be to build a second runway at Stansted, where a public inquiry had already been held and planning consent granted, followed by a third strip at Heathrow and finally by a second at Gatwick, he said.

To contact the reporter on this story: Peter Woodifield in Edinburgh at pwoodifield@bloomberg.net

To contact the editors responsible for this story: Douglas Lytle at dlytle@bloomberg.net; Chad Thomas at cthomas16@bloomberg.net


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