Ryanair Says Aer Lingus Bid Will Be Rejected

Ryanair, based in Dublin and Europe’s largest budget airline by number of passenger, said it had been informed at a meeting Tuesday with officials of the European Commission that Brussels “intends to prohibit” the airline’s nearly €700 million, or $942 million, bid for Air Lingus. The company said its proposed concessions and remedies did not go far enough to allay antitrust concerns.

Ryanair threatened to appeal any rejection of the merger to the European Court of Justice.

“It appears clear from this morning’s meeting that no matter what remedies Ryanair offered, we were not going to get a fair hearing and were going to be prohibited regardless of competition rules,” said Robin Kiely, a Ryanair spokesman.

Antoine Colombani, a spokesman for the European Union’s competition commissioner, Joaquín Almunia, declined to comment Tuesday. He said a formal decision on a Ryanair-Air Lingus combination would be made in late February or early March by the European Commission, the Union’s administrative arm.

The odds of winning approval for a combination of the two Irish carriers have never been strong, analysts said. Brussels has already rejected two previous attempts by Ryanair over the past six years to win control of Aer Lingus, a full-service airline that is 25 percent owned by the Irish government.

The government has opposed Ryannair’s overtures, saying that it would leave Ireland, an island nation, too dependent on one operator for vital air links abroad.

Ryanair already owns nearly 30 percent of Aer Lingus, and is seeking to buy out the government’s stake and the rest of the airline’s outstanding shares.

Given that history of rejections, investors were stunned when Ryanair announced last June that it was offering €694 million in cash for the stock of Aer Lingus it did not already own.

The offer of €1.30 a share, represented a 38 percent premium to Aer Lingus’s price at the time, but was less than half the €1.48 billion that Ryanair first bid for the stake back in 2006.

Back then, Aer Lingus was decidedly more vulnerable, hemorrhaging so much money on unprofitable routes and financing its debts that banks were refusing to provide fresh loans to finance its operations. Ryanair, which was expanding rapidly, coveted Aer Lingus’s valuable take-off and landing slots at key airports like Heathrow in London.

A drastic restructuring plan, implemented in 2009 by a new chief executive, Christoph Mueller, managed to stem the bleeding. By 2010, Aer Lingus was reporting an annual operating profit, its first since 2007.

The European Commission, which opened a detailed investigation into Ryanair’s latest bid in August, has echoed the Irish government’s concerns that a merged Ryanair-Aer Lingus would leave air travelers to and from Ireland with too little choice. Ryanair’s merger proposal envisioned operating the two airlines as separate businesses, although the two would control more than 70 percent of the Irish air travel market between them.

In recent months, Ryanair said it had approached rival European airlines, including British Airways and Flybe, offering to sell dozens of routes between Ireland, Britain and Europe in a bid to preserve competition and secure regulatory approval.

Ryanair described its proposed remedies as “unprecedented” and dismissed regulators’ objections as politically motivated.

“This decision is clearly a political one to meet the narrow, vested interests of the Irish Government and is not based on competition law,” said Mr. Kiely, the Ryanair spokesman.

The Irish government has come under pressure in recent years to dispose of its 25 percent stake in Aer Lingus, along with other state assets, as it seeks to pay back the €85 billion it received from a European bailout fund in 2010. But it has been reluctant to put its shares on the market, for fear they would be snapped up by Ryanair.

For its part, Aer Lingus said that its own improved financial performance over the past year argued even more strongly against a combination with Ryanair. The airline last week reported a 41 percent rise in operating profit for 2012, to €69 million, as its annual passenger numbers rose to a record 10.8 million.

“It was and remains Aer Lingus’s position that the offer should never have been made,” the airline said in a statement.

Ryanair contends that the competitive landscape in European air travel has changed significantly since its most recent failed bid for Aer Lingus, in 2008. The budget carrier notes that European regulators have since approved a series of big airline mergers, including that of British Airways and Iberia of Spain to form International Airlines Group in 2010, and that group’s subsequent acquisition of British Midland International in late 2011.

Article source: http://www.nytimes.com/2013/02/13/business/global/ryanair-says-aer-lingus-bid-will-be-rejected.html?partner=rss&emc=rss