Jeremy Warner: O'Leary back for a second bite at Aer Lingus
Tuesday 02 December 2008
Outlook: If at first you don't succeed ... Michael O'Leary, the pugnacious boss of Ryanair, thinks conditions in the airline industry have deteriorated so much in the two years since he last took a tilt at Aer Lingus that now he's bidding at half the price he did back then, the competition authorities in Europe will be only too happy to wave him through.
This strikes me and just about everyone else in aviation apart from Mr O'Leary himself as deeply unlikely. Remember, this is the man who has described those who determine these matters at the European Commission as a bunch of "communists" and "numbnuts", and invited anyone who comes across an EU civil servant to "give him a slap for me".
Mr O'Leary has always loathed the European Commission, which he thinks is out to obstruct his low-cost airline's every move in defence of the vested interest of national flag carriers. Relations reached a new low when Brussels decided to give his Aer Lingus takeover the thumbs-down. Nothing he said yesterday suggests reconciliation. Indeed, it seemed deliberately calculated further to rub the Eurocrats up the wrong way.
The case for allowing Mr O'Leary to acquire Aer Lingus is no better now than it was back then, despite the dire straits the industry finds itself in and the fact that smaller airlines are dropping like flies. Ryanair says it senses a sea change among regulators, who in the current very difficult economic circumstances may be more willing to put consolidation above competition concerns.
If, by this, Mr O'Leary is referring to Lloyds TSB and HBOS, he seems to have got the wrong end of the stick. HBOS's takeover by a rival bank is being allowed because HBOS's otherwise certain demise or nationalisation was thought a threat to Britain's financial and economic stability.
The same thing cannot be said about Aer Lingus, which is loaded with cash and, despite the traumas of the last year, remains financially solvent. The failing-company defence, under which anti-competitive mergers are occasionally allowed through because the alternative is insolvency, doesn't stack up. In any case, Aer Lingus and the Irish Government would have to back the merger for this to be a valid defence.
True enough, there is lots of consolidation in the airline industry now, including the planned merger of British Airways and Iberia, and it is also true that the Irish government, which owns 25 per cent of the stock, is desperate for cash. But there are few if any cases of monopolistic consolidation of two perfectly solvent same-country operators.
The commission blocked Mr O'Leary two years ago because Aer Lingus would have given him a combined total of more than 80 per cent of traffic in and out of Dublin. That's no less true today than it was then.
The risk Mr O'Leary is taking by trying again is that this time the commission will get tougher still, and force him to divest his 29.84 per cent stake. They let him keep the stake when they blocked him last time. Since Mr O'Leary's average purchase price was much higher than he could sell for today, enforced divestment would cost him dearly. Detente with Brussels looks further away than ever.
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