Ryanair might have struck a confident tone on Wednesday about its proposed takeover of Aer Lingus getting the green light from the European Commission but at least two prominent stockbrokers are less optimistic.
Irish broker Merrion yesterday said it was “somewhat sceptical” about the prospects of other airlines setting up bases in Dublin to take on short-haul Aer Lingus routes surrendered by Ryanair as a remedy to satisfy the commission’s competition concerns.
“We understand, for example, that British Airways has no intention of establishing a base in Dublin and from its point of view the Irish market is not of particular strategic interest,” Merrion said.
Credit Suisse was rather more direct in its assessment.
“We remain of the view that the European Commission is unlikely to approve Ryanair’s third bid for Aer Lingus,” it said.
It estimates that synergies of €40 million to €50 million are possible from the Ryanair takeover of Aer Lingus, but believes that the commission is unlikely to approve such a merger for various reasons.
Earlier this week it emerged that the commission had sent a statement of objections to Ryanair about the proposed deal.
Credit Suisse remains a fan of the Ryanair story.
It has added the airline to its European “focus list”, with an outperform rating and a 12-month price target of €5.85 – a 26 per cent premium to its current trading level.
Interestingly, Credit Suisse values Aer Lingus’s Heathrow slots at €113 million.
It has based this on the recent takeover of BMI by International Airlines Group, which is headed by Dubliner Willie Walsh.
IAG valued BMI’s Heathrow slots at €207 million or €4.9 million per slot pair, Credit Suisse noted.
Aer Lingus has 23 slot pairs at Heathrow, which are highly profitable for the airline.
Of course, valuing the slots is something of an academic exercise, given that Aer Lingus is unlikely to ever monetise them.
At least, not as an independent airline.
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