Ryanair shares take dip on back of Alitalia bid

Ryanair has confirmed it has made an indicative takeover offer for struggling Italian airline Alitalia, saying the potential long-haul passenger feed opportunities make the deal “interesting”.

However, news of the offer and Easter-strengthened first-quarter figures did little to help Ryanair’s shares, which fell by 3.7% in early trading before paring back to close the day down 1.1%. The stock is up by around 23% since the turn of the year.

The Italian government placed loss-making Alitalia into special administration in May. Ryanair has been linked to the Italian airline for some time — initially saying it would be interested in “co-operating” with the business rather than buying it. However, last month Ryanair boss Michael O’Leary said that the Irish carrier would consider a bid once Alitalia was restructured by the administrators. At that stage, it was reported that over 30 parties had expressed an interest in Alitalia, albeit for specific assets — such as planes or airport slots — rather than the business as a whole.

However, by the end of last Friday, the deadline for non-binding offers for Alitalia, 10 were reportedly lodged, including that of Ryanair and Etihad Airways, which currently owns 49%.

Interested parties have until October to lodge binding offers. If no buyer is found Alitalia will likely be wound up, as the Italian government has no interest in re-nationalising the airline.

Speaking yesterday, Ryanair’s chief financial officer Neil Sorahan said that as the largest carrier in Italy, with a 30% market share, “it is important we are involved in the process”.

“If it [Alitalia] is restructured to an extent where it can make money then it’s of interest; if it can’t then it’s not,” he added.

He said Alitalia’s short-haul business seems to have little or no future, but that the long-haul feed potential — Alitalia operates more than 30 US routes and numerous more to South America and the Asia-Pacific region — is “interesting”.

Ryanair has been looking at connectivity deals with a number of carriers, including Norwegian Air and Aer Lingus, for some time; whereby passengers can use Ryanair flights to link with their long-haul carrier and have their baggage automatically moved between the two. Mr Sorahan said Ryanair hopes to get at least one such partnership deal done before the end of this year.

Ryanair’s first-quarter figures, covering the three months to the end of June, showed a 55% year-on-year increase in after-tax profits to €397m and a 13% rise in revenue to €1.91bn.

However, annual comparisons were heavily skewed by this year’s inclusion of the Easter holidays, which fell in March (the end of Ryanair’s traditional fourth quarter) last year.

Nevertheless, the company has stuck with its after-tax profit guidance of €1.4bn-€1.45bn for its current year, with average fares set to fall 5% in the first half. First-half passenger numbers are expected to grow by 11%.

Ryanair also said any bilateral deal allowing for flights between the UK and the EU to continue — should Britain leave the EU Open Skies agreement — will be needed by autumn 2018 if it is to be ratified by remaining EU member states before the formal March 2019 Brexit date.

“The clock is really ticking. Every day which slips by makes it [the prospect of a halt to UK flights] more possible,” Mr Sorahan said.


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