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A Ryanair-free Aer Lingus ‘in national interest’
By Paul Mills
You may love him or you may hate him, but the one thing you cannot do is ignore Ryanair boss Michael O’Leary.
He is also one of the airline’s major shareholders and given the size of the company and its success, that is no mean thing. He’s back in the news this week — he’s never far from it — after making a formal bid for Aer Lingus, the erstwhile national carrier, in which Ryanair already owns around 30%.By offering €1.30 a share — in effect around 38c higher than current share value — he is apparently trying to secure at least 50% of the company.
Government owns 25%, which at the time of going public was seen as a golden share that would protect the national interest. It’s proven to be more of a millstone than an asset. Its shareholding based on a quarter of the €694m valuation is almost €175m. It’s not an enormous amount, but it’s not to be sneezed at either.
Ryanair has tried to take over Aer Lingus before, but was thwarted at every turn by its target’s directors, managers, unions, by the State itself — partly because of its antipathy towards O’Leary — and finally by the European Union’s competition authorities. However, O’Leary obviously feels that things are different now.
The economy is up the creek without much of a paddle, the unions no longer control a material shareholding, tens of millions of euro are needed every day from the troika to keep the wheels oiled and Government needs the cash or, at least, that is the view.
Given the lack of hysteria that accompanied his previous efforts, he may well be right. But that does not mean he should, or that he will, succeed this time.
The UK Competition Authorities, at the apparent urging of Aer Lingus, is examining whether Ryanair’s current 30% shareholding is in itself anti-competitive and gives a rival too much power over its competition.
Why an Irish company should feel it necessary to ask the UK government to judge a competition issue in Ireland is beyond more than a few of us? Of course, the spectre of European Competition Authorities coming back into the fray again is a distinct possibility and given that any review would be from scratch based on today’s circumstances there is every possibility of a different result. Again that does not mean that Ryanair should succeed in its quest.
Do not get me wrong. Ryanair has an awful lot going for it. Mind you, its online check-in is not one of them. Trying to navigate through it the other evening I found myself going back again and again to where I had to decide all over again whether I wanted priority, a new case, insurance and the rest. I have no doubt that it is part of its strategy.
However, it’s a highly successful airline. It carried 77m passengers last year against the Aer Lingus count of 9.5m. It’s highly profitable and has made O’Leary a very wealthy man. Its business model is simple but effective.
Passengers travel on it, not because of its excellent customer service but because of its competitive pricing if you can book in advance. It’s efficient, it’s cheap, it’s clean and it gets you there, or thereabouts.
The biggest issue facing it right now is that alleged 80% market share that the combined airlines would control. Persuading anybody that an 80% market share is not a virtual monopoly will be a very tough sell.
The Irish Exporters Association has objected to the sale to anyone, let alone Ryanair, given the importance of the Aer Lingus air cargo business to and from the US for Irish exports. They have a point. Ryanair is a totally different business model and cross contamination would be inevitable.
For these and a lot of reasons, on balance Aer Lingus should remain a Ryanair-free zone, for that most hackneyed of phrases — in the national interest.
* business@examiner.ie
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