Ryanair's audacious bid for its fellow Irish carrier is looking increasingly shaky as opponents endeavour to block its effort to net Aer Lingus.
Aer Lingus has set up a "defence team" to deal with the surprise approach from Ryanair, made up of advisers to the company including AIB's subsidiary Goodbody Stockbrokers, Merrion Capital and Goldman Sachs.
It is expected to sound out other potential buyers or "white knights". Emirates Airlines is one name in the frame, especially as Aer Lingus chief executive Dermot Mannion was previously finance director at the Dubai-based carrier. British Airways, where former Aer Lingus chief executive Willie Walsh is at the helm, has also been mentioned as a possible suitor.
Aer Lingus pilots is one group vocal in its opposition to the take-over and is doing all it can to block the move. It has acquired a 2.27% stake in the carrier through its pension fund and looks to be positioning itself to be part of a blocking coalition. In the middle of October Irish businessman Denis O'Brien acquired a 2.1% stake and is expected to add his weight to the opposition.
Under Walsh, Aer Lingus reinvented itself from legacy alliance member to low-cost carrier, although it still operates five long-haul routes out of major hub airports. Ryanair head Michael O'Leary insists Aer Lingus would remain as a standalone carrier if its bid succeeds. "It would be Aer Lingus that would continue to operate in the long-haul business," he says. "But there are enormous opportunities for cost savings by applying some of Ryanair's business methods to the Aer Lingus model," he adds.
However, one possible outcome would be the ultimate asset-stripping of the flag carrier. "If the move does happen asset-stripping is a possibility," says Thomas Lawton, senior lecturer in strategic management at the Tanaka Business School, Imperial College London. "Aer Lingus has Heathrow slots with a probable intangible value in excess of £200 million (€300 million)," he adds.
Aer Lingus holds the fourth highest slot allocation at Heathrow with 23 slot pairs, behind only BA, bmi and Lufthansa. Given Ryanair's concentration on Europe's secondary airports the carrier is unlikely to want to exploit these slots itself.
"I could see Ryanair maintaining Aer Lingus long-haul routes as well as major European hubs such as Heathrow, Paris and Amsterdam but the fate of other routes is far less clear. Ryanair would probably expedite the sale of real estate assets and Aer Lingus would end up a much smaller carrier," says Andrew Lobbenberg, analyst with ABN Amro bank.
Common ownership would give the two carriers a market share of more than 80% on both Ireland-UK and Ireland-Western Europe routes.
Source: Airline Business
