Dempsey says Ryanair bid will be evaluated

 

Minister for Transport Noel Dempsey said this afternoon he would evaluate Ryanair’s offer for Aer Lingus's once the Aer Lingus board had received a formal bid.

Mr Dempsey said the Government had been holding a "strategic" stake in Aer Lingus partly to prevent hostile bids.

"There is no restriction ... shares can be bought and sold," Mr Dempsey told RTÉ radio.

“The government has the shares in Aer Lingus for strategic reasons. One of the strategic reasons was to ensure that Aer Lingus held on to the slots at Heathrow.

“We also wanted to prevent hostile bids.

“Aviation policy here is that we should have competition and that any decision that might be taken by us as shareholder will be taken in the context of overall aviation policy.”

Unions earlier described Ryanair’s latest bid to buy Aer Lingus as mischievous and bad news for consumers. In a statement this morning, Ryanair said it was proposing a “merger of the two airlines into one strong Irish airline group under common ownership”. Aer Lingus would retain its brand name under the offer.

In response, Aer Lingus said it noted the offer and "strongly urged" shareholders to take no action. The carrier said another statement would follow.

Siptu, the State’s largest union, this morning described Ryanair’s latest bid to buy Aer Lingus as “mischief making" and contradictory.

Siptu Aer Lingus branch organiser Teresa Hannick said the Ryanair move “directly contradicts all their talk over the years about the necessity for competition in Ireland’s airline industry”.

“It suited Ryanair’s shareholders then because it had policy makers here standing on their heads and doing somersaults to meet their every whim,” she said.

“Now, thanks to the co-operation of those policy makers, Ryanair has established a dominant position and is moving to do what we always said it would -create a private sector monopoly so that it can absolutely dictate the agenda to the detriment of both consumers and workers.”

Ms Hannick claimed the initiative was “doubtless” designed to coincide with a dispute in Aer Lingus. “However workers and management in Aer Lingus have managed to formulate a proposal to save the airline, frustrate Ryanair’s monopoly ambitions, continue to promote choice to in the Irish airline industry and maintain some semblance of civilised working conditions.”

The Impact union said it had “major concerns” over Ryanair’s bid to increase its stake in Aer Lingus.

Impact - which represents cabin crew, management grades and pilots at Aer Lingus – said the most immediate concern was the threat of a monopoly in the Irish aviation industry.

“This would be very bad news for the consumer, as the removal of competition will almost certainly mean significant increases in air fares in the long term. Any Ryanair customer booking a flight for a sporting event, where the airline already has a monopoly, has experienced the reality of that,” a union statement said.

Impact said Ryanair’s claim the takeover would see 1,000 jobs new is “uncertain”, and there was no indication that new Irish jobs would be created. Ryanair rarely employs staff directly, the union added.

Impact noted the last attempt by Ryanair to take over Aer Lingus was rejected by Aer Lingus staff by a margin of 97 per cent.

“It is unlikely on this occasion that the response from Aer Lingus staff would be any different. Aer Lingus staff would expect a deep decline in employment standards at the airline should Ryanair take a controlling interest.”

Members of Impact’s cabin crew branch are being balloted on an agreement between the union and Aer Lingus on cost saving measures worth €17.5 million.

The €1.40 cash bid by Ryanair represents a premium of approximately 28 per cent over the average closing price of Aer Lingus shares for the 30 days to November 28th, 2008.

The carrier is seeking an early meeting with the Aer Lingus chairman, board and trustees of the Employee Share Ownership Trust to explain the bid.

Ryanair made a bid for Aer Lingus two years ago, but this was rejected by the former State carrier as “ill-conceived, contradictory and anti-competitive”.

But Ryanair chief executive Michael O'Leary said the economic and regulatory environment had changed markedly since Ryanair's last move was blocked by regulators.

"It [Aer Lingus] is increasingly viewed as a small, peripheral airline that has been bypassed by EU consolidation," he told broadcaster CNBC. "I think that without this bid Aer Lingus will continue to be isolated and loss making."

Mr O'Leary said he believed Aer Lingus staff would be more receptive this time given recent job losses.

Minister for Transport Noel Dempsey said the Government’s aviation policy was that passengers should have competition in terms of service provision. He said the Government had taken a strategic shareholding of 25.12 per cent to hold on to Aer Lingus’s landing slots at London’s Heathrow and also to prevent hostile bids.

Speaking on RTÉ radio, Jim Power, economist at Friends First, said the union of the two carriers would benefit the Irish economy. "I think it's an opportunistic move. I think Ryanair is very correct in saying that what Ireland needs at this stage is one very strong airline," he said.

Additional reporting Reuters