Ryanair aims to create major European airline

[December 1st 2008]

Ryanair is making a new bid for rival Irish airline Aer Lingus as it looks to create one of Europe’s big four airline groups.

The low cost airline wants to merge the two airlines into one strong Irish airline group. It says such a merger would create one of the big four airline groups in Europe alongside Air France/KLM, Lufthansa/Swiss, and British Airways Group.

Ryanair is offering €1.40 per Aer Lingus share, which values Aer Lingus at approximately €748 million. It says this represents a premium of about 25% over the closing price of Aer Lingus shares on November 28th.

In response, Aer Lingus has acknowledged the offer and says it will make a statement in due course. In the meantime it is urging shareholders not to take any action.

Ryanair says both airlines would operate as separate companies with distinctive brands, preserving the best features of both – ie Ryanair’s low fare, high punctuality operations, and Aer Lingus’ special brand and service culture as well as its long haul operations.

“This proposed merger of Ryanair and Aer Lingus will form one Irish airline group with the financial strength to compete with Europe’s three major airline groups - Air France, British Airways and Lufthansa,” comments Ryanair CEO, Michael O’Leary.

“The world has changed dramatically over the past two years, as high oil prices and deep recession have caused a flood of airline bankruptcies, consolidations and capacity cutbacks. Aer Lingus, as a small, stand alone, regional airline has been marginalised and bypassed as most other EU flag carriers consolidate,” O’Leary continues.

Ryanair has committed to double the size of Aer Lingus’ short haul fleet over the next five years, from 33 to 66 aircraft. It says this would create 1,000 new jobs in Aer Lingus during this period.

The budget airline also says that the merged Irish airline would have the cleanest, most fuel efficient fleet of Europe’s big four airline groups. Ryanair is committing to cut average short haul fares at Aer Lingus by 5% for three years. It also plans to eliminate Aer Lingus’ long haul fuel surcharges, generating a saving of about €100 million a year for consumers.

“We have today requested early meetings with the Irish Ministers for Finance and Transport, the Board of Aer Lingus, and Aer Lingus’s ESOT trustees to highlight the benefits for Ireland and all other stakeholders of this comprehensive and valuable merger proposal,” states O’Leary.

Written by: Nick Purdom

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