Ryanair drops interest as Aer Lingus loses €93m

RYANAIR will not bail out Aer Lingus with a new takeover bid in spite of the rival airline posting record €93 million losses.

With Aer Lingus losing €19 per passenger in the first six months of 2009, a Ryanair source said it was not in its interest to bid for the former national airline in its current financial state, though officially the airline said it had no comment to make.

Aer Lingus admitted its outlook was “uncertain” and blamed the huge dip in profits on loss of consumer confidence, the collapse of the economy and the imposition of the €10 passenger departure tax. The airline said it must press ahead with an “exhaustive and wide-ranging” examination of its operations and revenue stream.

That examination looks certain to result in up to 1,000 job losses before the end of the year, and the airline is already warning those affected that they can expect much poorer redundancy terms than those lavished on staff let go in recent cost- saving purges.

Aer Lingus admitted its future was bleak if it was not able to compete with its low-cost competitors.

“It is about a new Aer Lingus with a cost base that is more relevant to our nearest competitors, Easyjet and Ryanair, and with a revenue model that takes account of the fact that people are no longer prepared to pay high fares,” said the airline’s director of corporate affairs, Enda Corneille.

Aer Lingus had €803m in the bank at this time last year, by yesterday, chief financial officer Sean Coyle said, they had “burned through” €400m of that and said bankers were refusing to lend for fresh aircraft deliveries.

The €93m loss is four times what it was for the same period in 2008.

The airline said average fares for the six-month period fell by 17.1% on 2008. That represented a 13.1% fall in short-haul fares and an 18.5% fall on long-haul fares. Fuel costs rose 10% to €189.6m, while non-fuel costs fell 5.1% to €458.4m.

The figures would appear to make a potential Ryanair bid a real possibility, though Bloxham analyst Joe Gill said the “merger idea seems as welcome as swine flu in parts of Aer Lingus”.

However, he said new chief executive Christoph Mueller is a firm believer in merger and acquisitions.

“The Irish public, its politicians and unions would prefer Air France-KLM or BA as a partner. Both look impaired for now and are showing limited interest.

“Ryanair tried twice and we guess they have moved over to the long grass. It will take a car crash to bring them out of there, and anyway the key stakeholders remain implacably opposed to the second largest airline in the world,” said Mr Gill.