Flybe deal with Ryanair over Aer Lingus routes

Flybe's chief executive Jim French has said it intends to establish a "viable business" in Ireland if the European Commission clears Ryanair to take over Aer Lingus.

"Our objective is to provide a long-term sustainable business," Mr French said yesterday. "This is a long-term project we are working on."

He dismissed suggestions from Aer Lingus chief executive Christoph Mueller that Flybe was an airline with significant financial difficulties. He noted how it was Europe's largest regional airline and the biggest in the UK outside of London.

Flybe is loss-making and has announced a major restructuring for its core British operation.

'A bit cruel'

"I think he's been a bit cruel," Mr French said. "It's only four years ago that Aer Lingus sent a team into Flybe to understand our business." He added that Flybe would be profitable again next year.

Mr Mueller said the plan was "flawed" and would "not benefit the Irish travelling public".

Flybe confirmed yesterday that it had reached agreement with Ryanair to acquire half of Aer Lingus's short-haul business. This is part of a package of remedies that Ryanair has submitted to the European Commission to win approval for a takeover of Aer Lingus.

The deal with Ryanair would involve Flybe acquiring a new entity called Flybe Ireland from Ryanair for €1 million.

Flybe Ireland would have transferred to it the requisite number of slots and licences to operate 43 of Aer Lingus's short-haul routes from Ireland.

It would also have a minimum of nine Airbus A320 aircraft, and the required number of flight crew, aircraft engineers, management and facilities to operate the business.

Cash injection

Ryanair would provide it with a cash injection of €100 million and all forward sales cash and liabilities, estimated at about €50 million in working capital funding. Ryanair has also agreed to provide Flybe Ireland with a cost structure to deliver a pre-tax profit of €20 million in year one.

Flybe has undertaken to the European Commission to operate these routes for three years and will pay compensation if it fails to honour this obligation.

The UK airline said it has received irrevocable acceptances from 64 per cent of shareholders in support of the deal.

When asked what was to stop Ryanair from attacking Flybe's new Irish operation following a cooling-off period after the takeover, Mr French said: "If Michael [ O'Leary] were to do anything reckless, I suspect the European bodies would be keeping a very close watch on him."