Caution over Ryanair takeover bid
Friday, June 22, 2012
The news that Ryanair has launched yet another takeover bid for Aer Lingus would ordinarily strike fear into the hearts and minds of the traveling public.
However, taking a step back and looking at its context, it is perhaps not surprising that Michael O’Leary should pull such a stunt.
Absolutely nothing has changed in relation to the status of the competition issues since the last bid. In fact, on Jun 15 the UK Office of Fair Trading (OFT) said it would make a formal investigation of the existing 29.8% stake in Aer Lingus currently owned by Ryanair. It was to refer Ryanair’s minority shareholding in Aer Lingus for detailed investigation by the Competition Commission under the UK’s merger control legislation. This process could result in Ryanair being ordered to dispose of its shareholding. Has this driven the move by Ryanair to launch this bid?
Surely the Minister for Transport must direct that this bid be referred to the competition authorities here and the EU given that Ryanair would in effect have a monopoly on Ireland’s air connectivity.
On May 2 Ryanair’s chief, Michael O’Leary commented on Etihad’s purchase of 2.9% shareholding and warned if Etihad took over Aer Lingus Ireland could lose access to Heathrow.
“Etihad’s purchase of a 2.9% shareholding in Aer Lingus doesn’t alter the future of Aer Lingus, which can only be decided when or if the Irish Government sells their 25% stake.
“If this is sold to Etihad or to a financial investor, then it is inevitable that Aer Lingus will be broken up and some or all of its Heathrow slots lost to Ireland,” he said.
Who is to say that Ryanair and Michael O’Leary would not do the same thing? Ryanair has a track record of closing routes, often as a result of disagreements with a local airport or regulator over charges. The Government should take note that this could seriously affect the profitability of another of its strategic State assets — the Dublin Airport Authority.
The strategic slots at Heathrow are currently used exclusively for the island of Ireland. Ryanair has 51 bases across 28 countries.
It is highly probable that the Heathrow slots would be used by them to grow their business in other jurisdictions if such routes were scoped to be more profitable. It is not beyond the realm of possibility that Ryanair might go so far as to asset strip them and sell them off. These vital slots have proved crucial to inward investor considerations.
Killian Brennan
Clare Village
Malahide Road
Dublin 17
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