Ryanair came out of the
traps in June this year with a €694m offer to buy out Aer Lingus. It
marked its third effort to buy its smaller rival, in which it already
has a near 30pc stake.
But having had its first takeover attempt –
launched in 2006 – blocked by the European Commission on competition
grounds, Ryanair was always going to have to pull out all the stops if
it wanted to get the green light from Brussels this time around.
That
brought what Ryanair boss Michael O'Leary described as a "radical" set
of remedies from the budget carrier to put before EU competition
mandarins, including plans to ditch almost all the 24 valuable takeoff
and landing slots currently controlled at London's Heathrow Airport by
Aer Lingus.
IAG-owned British Airways has already told Ryanair that it would take 20 of the slots if the Aer Lingus takeover was approved.
But
it's still a very big 'if'. In November, the EU's Competition
Commission issued Ryanair with a so-called statement of objections, in
which it told the airline that its proposed remedies had not yet passed
muster.
It also hasn't yet been convinced that a merger between
Ryanair and Aer Lingus would result in efficiency gains that would
eventually result in lower prices for consumers.
The top concern will remain – how competition will be affected in what is a small, isolated market.
It's
difficult to see the EU approving the merger notwithstanding the fact
that the European aviation industry has seen a flurry of M&A
activity and failures in the past year. Analysts are also unconvinced
that Ryanair will pull a rabbit out of the hat this time around.
In
tandem to this, Ryanair has been fighting in the courts to prevent the
UK's Competition Commission from probing the airline's stake in Aer
Lingus. The watchdog wants to determine whether Ryanair's stake has had
undue influence on its smaller rival's strategy and damaged competition
on services between the UK and Ireland.
The UK's Court of Appeal
ruled in December that the Competition Commission does have the right to
investigate. Ryanair has said it will challenge the ruling in the
Supreme Court.
Importantly, the Competition Commission – if it
found that anticompetitive issues exist – could tell Ryanair to sell its
Aer Lingus stake. That could result in further protracted legal action,
however.
But things will probably come to a head well before that.
A
final decision from the European Commission on Ryanair's latest Unions,
Aer Lingus staff, business groups, politicians and a range of
interested parties will row in to do everything they can to prevent the
takeover takeover attempt is due on February 6.
Even if it
approves it, Ryanair will still have to persuade shareholders –
including the government, which controls the state's 25.1pc stake in Aer
Lingus, that this is a good deal. It seems like an almost impossible
sell.
Unions, Aer Lingus staff, business groups, politicians and a
range of interested parties will row in to do everything they can to
prevent the takeover even if the EU did give Ryanair the thumbs-up to
proceed.
And if by some twist of fate Ryanair did succeed in
acquiring Aer Lingus, it's probably safe to say it would be viewed by
staff as an occupying force. One can only imagine that resistance to any
proposed staffing or operational changes in Aer Lingus would be
intense.
Abu Dhabi-based airline Etihad, which owns just under
3pc of Aer Lingus, is also waiting in the wings. Its chief executive,
James Hogan, has made it clear that the airline would be interested in
buying a bigger stake in the Irish airline. For Aer Lingus, Etihad would
undoubtedly be a preferred partner.
Michael O'Leary has predictably said that Aer Lingus is doomed if Ryanair doesn't take it over.
He
has also claimed that Ryanair has had approaches from financial
institutions interested in acquiring its Aer Lingus stake if the EC
doesn't allow a takeover to proceed. Mr O'Leary insists this will result
in Aer Lingus being broken up.
It's true that in the longer term
Aer Lingus will need a strategic partner. But those partners are now
tougher to find in a European aviation landscape that is extremely
challenging and has seen a number of players – including IAG's Iberia
and SAS to name just two – struggle to realign themselves.
And
heaven forbid, what if a Ryanair takeover did end up being the best
thing that ever happened to Aer Lingus? It seems almost certain that we
will never find out if that would have been the case
- John Mulligan
Story: http://www.independent.ie
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