Aer Lingus rejects Ryanair takeover bid

Aer Lingus chiefs tonight rejected Ryanair’s ambitious plan to takeover the Irish flag-carrier.

The airline’s board of management advised shareholders to ignore Michael O’Leary’s fresh bid to buy out Aer Lingus.

Staff and unions at the carrier also condemned a possible merger, which Mr O’Leary claimed would form the world’s largest airline.

His proposed offer valued the former state-owned airline at €747.5m – around half the sum proposed by Ryanair in a failed bid two years ago.

The board of Aer Lingus said it significantly undervalued the airline.

“Aer Lingus remains a strong business with significant cash reserves and a robust long term future,” the board said in a statement.

“The board rejects this new offer and Aer Lingus shareholders are strongly advised to take no action in relation to the offer.”

Two years ago a similar approach by Ryanair was thwarted on European competition grounds, while the Government and airline employees, who own sizeable shareholdings in Aer Lingus, also voiced their opposition.

Mr O’Leary said high oil prices and the economic downturn meant the airline sector had changed dramatically since then.

He maintained one major Irish airline group would have the financial strength to compete with Europe’s three major airline groups – Air France, British Airways and Lufthansa.

“I can’t think of any other industry where Ireland leads the world or leads Europe,” said Mr O’Leary.

“With Aer Lingus and Ryanair together we have a world leader, not some 56th in Europe. We’d be the biggest international airline in the world.

“It would be a unique opportunity and I think it’s something that would appeal not just to the country but to the Aer Lingus stakeholders.”

Mr O’Leary said the firm was seeking 100% of Aer Lingus, but would accept 90%.

He said Aer Lingus would become a subsidiary of Ryanair Holdings, but would retain its own management team, brand, and its Heathrow slot – and he invited new Aer Lingus chairman Colm Barrington to join its board.

He also admitted staff could remain part of a union, which is not recognised for Ryanair workers.

“I don’t foresee any changes in the terms and conditions for the workforce,” he added.

Mr O’Leary said it was committed to doubling the size of the Aer Lingus short-haul fleet from 33 to 66 aircraft over the next five years – creating 1,000 Aer Lingus jobs in the period.

He called on the Government, which still owns a quarter of the former state carrier, to back his plan for the sake of the country.

Irish Transport Minister Noel Dempsey said he would evaluate the proposal from the perspective of the Government as a shareholder in Aer Lingus and having regard to Ireland’s aviation policy.

Threatened strike action at Aer Lingus, which is attempting to implement a controversial €74m cost-cutting programme, was called off last week after a framework was hammered out with union bosses to deliver savings on staffing costs without outsourcing 1,300 jobs.

The result of a ballot by Impact and SIPTU trade union members on the measures agreed should be known tomorrow.

SIPTU, which represents the majority of Aer Lingus workers, described Ryanair’s proposal as just another attempt at mischief-making.

“Doubtless, the initiative was originally designed to coincide with a dispute in Aer Lingus,” said Aer Lingus branch organiser Teresa Hannick.

“However, workers and management in Aer Lingus have managed to formulate a proposal to save the airline, frustrate Ryanair’s monopoly ambitions, continue to promote choice in the Irish airline industry and maintain some semblance of civilised working conditions.”

Impact trade union, which represents cabin crew, management grades and pilots at Aer Lingus, said staff at the airline own about 15% of the company.

“The last attempt by Ryanair to take over Aer Lingus was emphatically rejected by Aer Lingus staff, by a margin of 97%. It is unlikely on this occasion that the response from Aer Lingus staff would be any different,” a spokesman added.

Shares in Aer Lingus – which in August reported half-year operating losses of €22.3m – rose 14% following the statement as analysts said there was a greater chance that Ryanair would secure a deal.

Andrew Lobbenberg, an analyst at Royal Bank of Scotland, gave the latest bid a 50% chance of success.

He said: “We see this bid as having a better chance of approval, given the flow of mergers and approvals of state aid within the sector, as well as recent combinations of businesses in financial services, that would never have passed competition authority scrutiny only three months ago.”

Mr Lobbenberg added: “We believe this offer faces a notably higher chance of success than the previous bid, though we still expect competition policy challenges and labour opposition.”