Ryanair braced for Aer Lingus defeat

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The Independent Online

Ryanair's chief executive, Michael O'Leary, conceded yesterday that its contested €1.48bn (£990m) bid for Aer Lingus was unlikely to succeed because of the hostile reception from employee shareholders at the rival Irish airline.

The admission came as Ryanair reported record first-half profits and said it intended to make its first cash payout to shareholders since the no-frills airline listed nine years ago.

Mr O'Leary said the €2.80-a-share offer for Aer Lingus was unlikely to proceed if, as appeared probable, the Employee Share Ownership Trust which controls 13 per cent of the company voted against the offer. "It looks likely they are going to turn it down which means it is unlikely our offer is going to succeed," he said.

He refused to be drawn on whether Ryanair would raise its offer. He said that in the event of the bid failing, Ryanair would hold on to the 19.1 per cent stake it has built up in Aer Lingus and, as a "long term and vocal shareholder", continue to press for cost reductions, lower fares and the removal of the airline's fuel surcharge.

"If this offer fails this time, we will continue to be a very significant minority shareholder in Aer Lingus," Mr O'Leary said. Ryanair remained committed, he added, to the creation of one strong Irish airline because Aer Lingus was too small, too high-cost and too insignificant to contribute in any meaningful way to the growth of European air travel over the next decade.

The return of capital to shareholders is likely to take the form of a share buy-back or a special dividend and is expected to total €200m-€300m. Ryanair, which had cash of €458m at the end of September, aims to complete the capital payment by the end of next year.

Mr O'Leary said it would go ahead whether or not Ryanair's bid for Aer Lingus succeeded. The first closing date for the offer is next Monday and the offer will end on 22 December, about the same time as the European Commission is due to decide whether or not to allow the takeover to proceed.

Mr O'Leary said he was confident Brussels would clear the deal with some conditions. Ryanair has offered legally binding undertakings to reduce fares, reduce the fuel surcharge and upgrade Aer Lingus's long-haul services if it gains clearance.

He was speaking as Ryanair reported a 38 per cent rise in first-half pre-tax profits to €372.1m and raised its forecast for the full year. The airline now expects its after-tax profit for the 12 months to rise by 16 per cent to €350m compared with a previous forecast of an 11 per cent improvement.

Although Ryanair continues to be cautious about the outlook, Mr O'Leary said it expected average fares to be 2-3 per cent higher in the current quarter compared with an original forecast of a 5 per cent decline.

Mr O'Leary said the disruption to air travel in August caused by the security clampdown at UK airports had cost Ryanair about £3m. He criticised British Airways for "gilding the lily" with its estimate last week that the disruption had cost it £100m.

The Ryanair boss also renewed his attack on the "monopoly mismanagement" of the airport operator BAA, saying it had worsened since the takeover of the group by Ferrovial of Spain. In particular, he criticised the continued under-staffing of security at Stansted. He said that during the peak period on Sunday evening, only half of the 14 security posts had been open. When Ryanair complained to BAA, it was told that a number of security personnel had failed to turn up to work because they lived in north London and were watching the Arsenal and Spurs matches.