Ryanair to buy Aer Lingus ?

[andorra-airport]

I have no idea who holds the remaining of the shares (next to the 25% of the government, about 3% by Etihad and 29% of RYR)

Some "bigger" one's are Denis O'Brien with 3.8%, Irish Life Investments with 2.9% and the Pilots Pension Scheme with 2.2%.

[fcw]

I fail to see the "monopoly" argument. DUB is, unlike LHR, AMS, FRA, CDG,.. not slot restricted and far from saturated. Every airline wich wishes to start any route to/from DUB can do so. FR/EI would be the sole operator on the majority of their routes to/from DUB but it is not a monopoly!
FR is the only operator on many of its routes and is not taking advantage by charging higher fares.
The EU "NO" is probaly a consequence of intense lobbying to prevent FR from entering the longhaul segment.

[shockcooling]

I guess Ryanair has too much 'money' in the bank and wants to invest in something like start doing longhaul, but why buy Aer Lingus for it, they're scared to start-up something from their own? I would fly them


Btw, I guess with the current 1000+ orders for the MAX/NEO, investing in a nice new order isn't going to happen as they will have to wait a long while... I thought, with their previous 'monster order', they actually gained a lot from it and therefore have managed to keep operating all this time at lower costs.
What do you think the future will be if they would keep their current 737s flying until...?

[Charlie Roy]

A bit off topic, but Aer Lingus have announced today that they are moving all their Belfast operations from International to City: http://www.rte.ie/news/2012/0719/aer-li ... iness.html

PS: I wonder would those A319's be profitable on a few Belfast to Brussels rotations every week.

[Inquirer]

DUB is, unlike LHR, AMS, FRA, CDG,.. not slot restricted and far from saturated. Every airline wich wishes to start any route to/from DUB can do so. FR/EI would be the sole operator on the majority of their routes to/from DUB but it is not a monopoly!

In anything, that will be even more of a reason to block it in the view of the EU.

The EU Commission loves to make sure there's always a choice and hates it when mergers reduce the number of options consumers have.
If there's a merger in a market where you have slot restrictions (take for instance BA/BMI at LHR), the standard remedy by the merging companies is to give up a significant number of slots and thus allow potentially new competitors to step in and to prevent a monopoly from forming as a consequence of the merger.
If however there are no slot restrictions, then the merging companies don't have any attractive incentives to offer in order to attract renewed competition and the merger will most probably result in a monopoly being formed indeed, which is exactly what the EU has a habbit of wanting to prevent from happening at all cost: see the rejected merger of Olympic and Aegean in Greece for instance, which got rejected for pretty much these very reasons.

FWIW, it seems RyanAir hasn't even bothered asking for a tentative ruling on their plans from the EU commissioner before putting the offer in, which I personlly find very odd given the history of failed attempts so far, unless of course they aren't really seeking consolidation so much, but rather just public confrontation for whatever strategic reason you can think of.

Finally, it is being reported that the RyanAir bid is on the very low side if you look at the balance sheet of Aer Lingus, given cash per share currently stands at €1.87, or more than €0.50 higher than the offer from Ryanair, whereas asset value per share also stands much higher at €1.56! Add some non-accounted assets like the valuable LHR slots to the equation and the offer becomes really really low indeed. Given Aer Lingus isn't bleeding money (quite on the contrary even) and thus isn't burning any of its cash either nor seling its assets, I know I wouldn't sell any shares off under those terms, provided the sale is capable of competion even, that is.

[fcw]

it is being reported that the RyanAir bid is on the very low side if you look at the balance sheet of Aer Lingus, given cash per share currently stands at €1.87, or more than €0.50 higher than the offer from Ryanair, whereas asset value per share also stands much higher at €1.56! Add some non-accounted assets like the valuable LHR slots to the equation and the offer becomes really really low indeed. Given Aer Lingus isn't bleeding money (quite on the contrary even) and thus isn't burning any of its cash either nor seling its assets, I know I wouldn't sell any shares off under those terms, provided the sale is capable of competion even, that is.

The only correct price is the market price Aer Lingus is currently sold at 1,08€ so the FR bid is 20% above the market price.
The cash (remember our BruAIr discussion and also De TIJD of today regarding money shortage at BruAIr...) is not theirs it is mainly prepaid tickets, if FR woould have to pay this cash they would have to transport the passengers fo free afterwards!
I suppose you put all your savings in Aer Lingus shares if you realy believe there is 1,87€ cash attached to each share you can buy for 1,08...

[Inquirer]

The only correct price is the market price Aer Lingus is currently sold at 1,08€ so the FR bid is 20% above the market price.

Well, I surely would be very reluctant to say such things!

Many companies are undervalued/overvalued by just looking at their sharevalue, for the simple reason investors always tend to factor in their expectations in the share pricing.
This means share value thus gets more of a forward looking speculative aspect rather than it being a correct representation of the current value of a company.
Need I remember the very recent Facebook IPO as clear proof of how these expectations can drive up/down share value? Or any of the many other bubbles we've had on the stock markets in the past couple of years?

Seriously, share price is pretty much the worst thing to look at when determining the real value of a company, which is why investment banks have whole branches specialized on it: if it were even remotely as easy as simply looking at the share value and multiplying it by the number of shares...

The cash is not theirs, it is mainly prepaid tickets, if FR would have to pay this cash they would have to transport the passengers for free afterwards!

Indeed, but that's precisely the business you'd be buying, remember? A lot of cash means a robust business.
Unless you're not really interested in the business at all, cash is one of the things you need to look at when buying a company.
Besides, not only is the total gross cash of Aer Lingus much higher than the bid, but more importantly also is the fact that the net value of assets held by Aer Lingus is bigger. May I point out that contrary to the cash, those assets are genuinely theirs and hold no obligations?
Given their asset value is apparently not including their LHR slots even, which if I remember well are quite numerous indeed and do come with a very big potential sale value, the RyanAir bid is not a very attractive one, IMHO.

I suppose you put all your savings in Aer Lingus shares if you realy believe there is 1,87€ cash attached to each share you can buy for 1,08...

You'd really only want to do that with your underlying reasoning, if your aim is to close the shop asap: a low bid like the one RyanAir put in certainly would make that possible without loosing any money because a subsequent winding down of the company would result in a healthy rest profit even.
Food for thoughts, isn't it?

Anyway, as said: why not wait to see if this bid ever passes the all important EU test?
Seems to me like they are doing things the wrong way round, which is very surprising to me, given their past attempts have failed.

[Boeing767copilot]

Etihad wants Aer Lingus stake

http://www.belfasttelegraph.co.uk/busin ... 99019.html

[Charlie Roy]

Meanwhile in a bid to gain EU support Ryanair say that they will drop some Aer Lingus routes to allow competition in if they succeed:

http://www.rte.ie/news/2012/0816/ryanai ... eover.html

[Flanker]

The only correct price is the market price Aer Lingus is currently sold at 1,08€ so the FR bid is 20% above the market price.

Well, I surely would be very reluctant to say such things!

Many companies are undervalued/overvalued by just looking at their sharevalue, for the simple reason investors always tend to factor in their expectations in the share pricing.
This means share value thus gets more of a forward looking speculative aspect rather than it being a correct representation of the current value of a company.
Need I remember the very recent Facebook IPO as clear proof of how these expectations can drive up/down share value? Or any of the many other bubbles we've had on the stock markets in the past couple of years?

Seriously, share price is pretty much the worst thing to look at when determining the real value of a company, which is why investment banks have whole branches specialized on it: if it were even remotely as easy as simply looking at the share value and multiplying it by the number of shares...

The only correct price is the price that the holder of a stake is willing to sell at! Which in most cases when buying a major stake is market price plus a premium.

The intrinsic value or tangible book value, what you call "real value" of a company is only one of the many things that influence the market price. Market price is also influenced by many major factors such as recent past performance, outlook, dividend rates but also the competence of management, "ideologies" of other major shareholders and most importantly, the importance of the core business.

The tangible book value would be a good starting point to start analyzing, but not always.
Many companies prefer to give up most of their earnings to the shareholders as a dividend rather than to keep it and raise the book value. Boeing and Lockheed Martin earn more in a year than what they are worth at book value, so there the market value is many many times the book value.

Market price best reflects the general "feel" of a company, but major stakeholders can decide for themselves at what price they would deem it acceptable to let go of their stakes.

Facebook is a very bad example because it was bought by amateurs who bought it for an imaginary or emotional value or broker manipulation. Eventually, the market did correct it to reflect a more realistic share price in view of its performance outlook, because if you were to judge Facebook by your "real value", the share would be worth only 5.83$.


FCW, FR does have a huge pile of assets (cash) to cover this purchase.
Once purchased, it's not like those assets disappear, they are just converted into Aer Lingus shares.

Aer Lingus does seem to have a huge pile of assets but also quite a decent amount of debt supporting them. Their financial performance isn't good and hasn't been anything spectacular but a steady decline, so I deem the current share price very decent for what it is. I don't like their brand concept and I think that FR should steer clear because if Aer Lingus is gone, it opens the market for a new competitor, which may be much tougher to deal with than EI.

Ryanair should focus on maintaining what they have now, which is a very good deal, and to start lobbying politicians to do that easier.
Maybe, if they want to try it out, they could establish a new subsidiary with a new, low risk but much better product that could drive EI out of business and at the same time avoid new competitors. That way they build a good starting point to establish a low cost long haul subsidiary. Remember here, low cost doesn't necessarily mean low fares.


I think that FR's bid is too emotional. I think that it's a life-long dream of prestige for MOL or the Ryan family to own EI.

[Charlie Roy]

More specifically Ryanair say they are prepared to give up Aer Lingus' London routes:

http://www.independent.ie/business/iris ... 03861.html

[sn26567]

Ryanair would also be interested in a stake in Stansted airport, which the British Airports Authority (BAA) is compelled to sell under a British anti-trust order.

I would like to see how Ryanair would handle a contradictory situation, wanting to pay as little as possible to airport operators, but becoming itself an airport operator where it will want to maximise profits.

[Inquirer]

More specifically Ryanair say they are prepared to give up Aer Lingus' London routes:

London is a route where there is already very strong competition today: other than Aer Lingus and Ryanair, British Airways flies to LHR 8 times daily and Cityjet does LCY 4 times daily from DUB.

Shifting the flights to LHR from Aer Lingus to Virgin Atlantic (or someone else) isn't going to increase the number of competitors, it will only avoid a reduction by swapping 1 of the 4 current operators for another one, yet I fail to see how is this swap supposed to increase competition on the route, which is what the EU would be after?

Besides, I don't think the main problem the EU is potentially having with this merger is on the few slot restricted routes like London because there competition is already well present, but rather on all the other routes like those to for instance Belgium, because there a merger between Aer Lingus and Ryanair would effectively eliminate any competition left and mean significantly higher fares for passengers in markets at both ends.

The thing really needed is more EU airlines serving DUB in order to increase the choice on routes from Ireland to the rest of the EU, beyond waht is currently offered by Aer Lingus and/or Ryanair: that doesn't seem very likely to happen anytime soon however, so my guess is the EU is indeed going to prevent the only 2 airlines present on that market from merging: they have done exactly the same to Olympic and Aegean for the very same reason.

[Inquirer]

Competition on Dublin-London to seriously increase beyond the present level, all without the need for Ryanair to give up Aer Lingus slots: viewtopic.php?f=31&t=48097

This makes Ryanair's proposed remedy look completely pointless and most likely dead on arrival, which may have been the aim of course!

[airazurxtror]

http://www.irishtimes.com/newspaper/fin ... 70281.html

RYANAIR HAS received commitments from “multiple airlines” to operate routes currently served only by Ryanair and Aer Lingus in the event of a Ryanair takeover of the former State carrier, Ryanair’s chief executive has said.
Asked whether there was an anti-Ryanair bias in Brussels, Mr O’Leary said: “An anti-Ryanair bias would be a bit strong. There is certainly, in Brussels, a latent pro flag-carrier mindset.”
He said Ryanair’s bid for Aer Lingus was “the only significant airline merger blocked in the last six or seven years”.

The Irish Government, a 25 per cent shareholder in Aer Lingus, had been neutral in its response to Ryanair’s takeover bid, he said. “To be fair, I think the Government has taken an independent position on this. We’ve seen no evidence that the Government is lobbying against it – or for it. ”

If Ryanair’s bid is rejected by the commission, Mr O’Leary said Aer Lingus would cease to exist as an independent entity within five years. “If our offer isn’t accepted, I think it is inevitable that Aer Lingus will then get broken up.”

Ryanair had already received approaches from financial institutions interested in buying the airline’s 30 per cent stake in Aer Lingus, Mr O’Leary added.

[Passenger]

http://www.irishtimes.com/newspaper/fin ... 70281.html

RYANAIR HAS received commitments from “multiple airlines” to operate routes currently served only by Ryanair and Aer Lingus in the event of a Ryanair takeover of the former State carrier, Ryanair’s chief executive has said.
Asked whether there was an anti-Ryanair bias in Brussels, Mr O’Leary said: “An anti-Ryanair bias would be a bit strong. There is certainly, in Brussels, a latent pro flag-carrier mindset.”
He said Ryanair’s bid for Aer Lingus was “the only significant airline merger blocked in the last six or seven years”.

The Irish Government, a 25 per cent shareholder in Aer Lingus, had been neutral in its response to Ryanair’s takeover bid, he said. “To be fair, I think the Government has taken an independent position on this. We’ve seen no evidence that the Government is lobbying against it – or for it. ”

If Ryanair’s bid is rejected by the commission, Mr O’Leary said Aer Lingus would cease to exist as an independent entity within five years. “If our offer isn’t accepted, I think it is inevitable that Aer Lingus will then get broken up.”

Ryanair had already received approaches from financial institutions interested in buying the airline’s 30 per cent stake in Aer Lingus, Mr O’Leary added.

Just to make sure, because the quote from the article is only partial: when people in the U.K. (and even in The Netherlands) talk politics about "Brussels", they don't mean "Belgium", but "the European Commission". The above article indeed also mentions:

Ryanair has submitted draft proposals to the European Commission, which will rule on the proposed takeover by January.

The commission rejected a bid by the airline for Aer Lingus in 2007 on competition grounds. In 2009 Ryanair withdrew an offer before it had been considered by the commission. Mr O’Leary said he believed the remedy package submitted by Ryanair to the commission would allay competition concerns. “It goes way beyond any of the recent remedies that they have accepted for previous transactions such as BA-BMI, Air France- KLM or Lufthansa. It involves getting other airlines to come to Dublin and competition on all cross-over routes.”

Asked whether there was an anti-Ryanair bias in Brussels, Mr O’Leary said: “An anti-Ryanair bias would be a bit strong. There is certainly, in Brussels, a latent pro flag-carrier mindset.”

[airazurxtror]

Just to make sure, because the quote from the article is only partial

As far as I know, these newspaper articles are under copyright, and one is allowed only to summarize them or reproduce a small part; that is why the reference is given, with easy access to the full text.
You reproduce the full text under your own responsability.

[Passenger]

Just to make sure, because the quote from the article is only partial

As far as I know, these newspaper articles are under copyright, and one is allowed only to summarize them or reproduce a small part; that is why the reference is given, with easy access to the full text.
You reproduce the full text under your own responsability.

Totally agree. But then, you haven't given a summary either: you've quoted almost the whole article, except for the most relevant = what the newspaper wrote about the European Commission, and what Your Royal Highness told the world (and the newspaper) about "Brussels".

[cnc]

what would FR do with EI?

[Airbus330lover]

Try TATL flights..... but with many problems. Immigration is not possible on secondary airports.