Ryanair to detail ‘remedy package’

Ryanair will have to supply a detailed “remedy package” to the European Commission as part of the second phase of the EC’s investigation into its Aer Lingus takeover attempt.

There is a general consensus that the EC is not going to give clearance to Ryanair’s €694m offer for Aer Lingus tomorrow. This means that the takeover attempt will enter the prolonged Phase II investigation.

Ryanair CEO Michael O’Leary said he expected the EC to move to Phase II, but said he would offer unspecified remedies to allay competition concerns. Analysts expect him to try to convince rival airlines to commit to compete on the 44 routes where Ryanair and Aer Lingus currently have no third-party competition.

Merrion capital analyst Gerrard Moore said that the deal would now enter a very detailed period of intense analysis for several months.

“The EC will embark on a very detailed analysis as to whether the deal can go through,” said Mr Moore. “Ryanair will definitely have to propose a remedy package. The question is what will the remedy be and will competition be in place. If they could get British Airways or Virgin on board, that would be one tick in the box, but they will need much more than that. The trick is proving competition across the network.”

There has been much speculation that Ryanair would invite British Airways or Virgin Atlantic to take over a number of routes. The routes to London, and Heathrow in particular, are considered to be key to proving that there is functioning competition in the Irish aviation market.

Even if these hurdles are overcome, it will still be a struggle for Ryanair to gain control of its main Irish rival. Ian Hunter, analyst with Dolmen Stockbrokers, thinks Mr O’Leary’s no-frill airline would get a bargain if it snapped up the former state airline for €694m.

“For the Ryanair side, if it were to go through, they would be getting something at a very good price commercially,” said Mr Hunter. “We agree with the Aer Lingus management that the company is worth more.”

Mr Hunter said that most institutional investors are looking for a better price.

There has been very little movement in Aer Lingus shares since the takeover bid was announced in June, but Mr Moore pointed out that this is due to the Aer Lingus ownership structure.

“Aer Lingus is an illiquid stock, with the Government, management, and personnel all owning large chunks of shares,” he said.