Airline Code [RYR]
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Tags :UK, Ryanair, Aer Lingus
The Board of Ryanair announces its intention to make a Cash Offer of EUR1.40 per
Aer Lingus Share for 100% of the issued and to be issued share capital of Aer Lingus. Ryanair intends to make this offer through its wholly-owned subsidiary, Coinside.
Ryanair already owns approximately 29.82% of the current issued share capital of Aer Lingus and expects to accept the Cash Offer in respect of these shares.
The Board of Ryanair proposes to merge the two airlines into one strong Irish airline group under common ownership. Similar to previous European airline mergers such as Air France/KLM and Lufthansa/Swiss, both airlines will operate as separate companies,
with distinctive brands.
Ryanair believes this Cash Offer provides attractive and certain value for Aer Lingus
shareholders. Ryanair believes the Cash Offer is generous in the context of:
• The collapse in Aer Lingus’ share price from a high of over EUR3.00 in Dec-06 to less than EUR1.00 in Nov-08
• Aer Lingus’ load factors which have declined by over 7% (long haul) and almost
2% (short haul) in 2008
• Aer Lingus’ forecast operating losses for 2008 and again in 2009
• The current airline industry crisis amid the deepening economic recession
• Declining equity prices
Ryanair believes that Aer Lingus is an isolated, uncompetitive, loss making EU flag carrier which has been bypassed by accelerating EU wide airline consolidation. Ryanair believes that Aer Lingus needs to find a strong airline partner to secure its future. Over the past two years, the trading environment for all European airlines has deteriorated dramatically as a result of high oil prices and the global recession. This has triggered a wave of EU airline closures and failures (in all, over 30 airlines have failed this year). In response, pan-European airline consolidation has accelerated as Europe sees the emergence of three large mega-carriers, Air France, British Airways and Lufthansa, and the rapid growth of Ryanair.
Ryanair believes that the Offer provides a financially robust partner, in one strong Irish airline group, within which Aer Lingus will retain its separate brand as well as secure the Heathrow slots and connectivity for Ireland at lower fares.
The Cash Offer, which will be made by Coinside, a wholly owned subsidiary of Ryanair, will be subject to certain conditions including, amongst other conditions, the acceptance by Aer Lingus Shareholders holding not less than 90% of the issued and to be issued share capital of Aer Lingus (or such lower percentage as Ryanair may determine, subject always to the Takeover Rules), the passing of the
Ryanair Shareholder Resolutions at an EGM to be held as soon as reasonably practicable to approve the Cash Offer, and Ryanair obtaining EU Commission clearance or (as the case may be) Irish and other applicable EU member state competition law clearance for
the combination of Ryanair and Aer Lingus.
Commenting on the Offer, Ryanair’s Michael O’Leary said: “This proposed merger of Ryanair and Aer Lingus will form one Irish airline group with the financial strength to compete with Europe’s 3 major airline groups - Air France, British Airways and Lufthansa. 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.
Over the past 2 years, the management of Aer Lingus have failed its shareholders, customers and staff. Its shares have fallen from over EUR3, to less than EUR1 recently. Fares and fuel surcharge increases have cost consumers over EUR140m p.a. and repeated restructurings have led to pay cuts and job losses with no substantial benefit as operating costs per passenger have risen by 18% in just 2 years. Aer Lingus is now suffering load factor declines, and has recently announced capacity reductions and forecast operating
losses in 2008 and again in 2009.
Ryanair’s merger proposal offers Ireland a better future by:- - delivering over EUR325m in cash to the Irish government, the ESOT and Aer Lingus employees
- guaranteeing that Aer Lingus will remain a separate company with a special brand
- securing Heathrow slots and their connectivity for Ireland at lower fares
- doubling of Aer Lingus’ short haul fleet to 66 aircraft within 5 years, creating 4 over 1000 associated new jobs in Aer Lingus
- cutting Aer Lingus’ short haul fares by 5% for 3 years, saving consumers over EUR40m annually
- removing Aer Lingus’ long haul fuel surcharges, saving consumers over EUR100m annually
- creating an Irish national champion in the airline sector with a growing pan- European and transatlantic network
- assuring Aer Lingus’ future in one of the EU’s Big Four airline groups (Air France/KLM, British Airways Group, Lufthansa/Swiss & Aer Lingus/Ryanair)
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.”
(c) Centre for Asia Pacific Aviation. Date posted: 02-Dec-08
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Ryanair announces merger proposal with Aer Lingus 
