Ryanair bids to buy Aer Lingus

The low-cost airline Ryanair today unveiled an offer worth £1 billion to buy the Irish carrier Aer Lingus.

Chief executive Michael O'Leary said the move represented a "unique opportunity" to form a strong airline for Ireland with more than 50 million passengers annually.

Ryanair has already acquired a 16 per cent stake in Aer Lingus - which was listed on the stock market last month - and will make an offer for the rest in a move valuing the carrier at 1.48 billion euros (£1 billion).

Mr O'Leary said both companies would continue to operate separately and "compete vigorously" on the small number of routes on which they both operate.

He added: "We will expand, enhance and upgrade the Aer Lingus operations."

In an offer document, Mr O'Leary said his airline pledged to reduce Aer Lingus's average short haul fare by 2.5 per cent a year for a minimum of four years, as well as reduce fuel surcharges as the price of oil falls from recent highs.

Ryanair has also pledged to retain the Aer Lingus brand and all the profitable routes currently operated by the airline.

The Irish Government still owns around 30 per cent of Aer Lingus following the listing of the business on the London and Dublin stock markets on September 27.

The company said: "Ryanair has grown to be Europe's largest low fares airline by continuously lowering prices and funding these reductions through cost savings and efficiencies.

"We believe there is an opportunity to apply this successful low fares formula to Aer Lingus where currently, in its short haul operation, fares and costs remain far too high."

Ryanair said its offer of 2.80 euros a share would realise more than 500 million euros (£337.2 million) for the Irish Government, while Aer Lingus staff stand to pick up an average of 60,000 euros (£40,468) from the sale of shares.

The offer is at a premium of 27% on the Aer Lingus share price on the day of its flotation. Ryanair added that its offer was conditional, among other things, on obtaining at least a majority of the shares in Aer Lingus.

The company pointed out that there were numerous precedents across Europe for two airlines of similar nationality coming together to form a stronger, more diversified airline group.

Mr O'Leary outlined the reasons for the takeover bid.

"Aer Lingus has a lot of compelling services to Ryanair. Aer Lingus has a large long haul operation, it has a big cargo service," he said.

"We believe that by working together we could improve, expand and improve the long haul operation.

"We could also, with the short haul operation, help reduce Aer Lingus costs, reduce Aer Lingus fares and enable it to grow, maybe as quickly as Ryanair by offering lower fares to many more millions of Irish and European consumers."

Mr O'Leary said he would have no difficulty in dealing with the notoriously strong Aer Lingus unions and said arrangements already in place would remain.

"We would have no difficulty talking to union leaders but again that would be a company issue for the management of Aer Lingus and not for Ryanair," he told RTE Radio.

Mr O'Leary said he expected the European Competition Authorities to rule on the takeover.

But he said it should be treated in the same way as Air France, SAS in Scandinavia and Lufthansa in Germany, all of whom dominate their domestic air travel market.

"I think it is a compelling opportunity here for the Government, for the staff and more importantly for the Irish economy and tourism," the airline boss said.

But Mr O'Leary said he had no intention of taking a seat on the Aer Lingus board, adding that the two companies would be run separately.

In a statement the Irish Government insisted it had no intention of selling its stake of at least 25.1% in Aer Lingus.

"The Minister for Finance, Brian Cowen, TD, and the Minister for Transport, Martin Cullen, TD, have stated that the Government remains fully and firmly committed to competition in aviation markets," it said.

"It will not sell its shares in Aer Lingus."

The short-haul operation of Aer Lingus comprises 11 routes to the UK and 57 routes to continental Europe. The long-haul network includes up to nine routes to the United States and one route to the United Arab Emirates.

Aer Lingus also provides cargo services on its fleet of 35 aircraft.

Ryanair operates 750 scheduled short-haul flights per day serving 115 locations in Europe, based on an operating fleet of 107 aircraft.

The company achieved turnover of 1.69 billion euros (£1.14 billion) in the year to March 31, against one billion euros (£674,500) for Aer Lingus in 2005.

Aer Lingus said they were considering the audacious takeover bid.

A spokesman for the airline said: "The company are considering this morning the announcement with advisers. The company is not in a position to make any further comment at this time."