Ryanair says it will appeal the EU Commission’s decision to prohibit the merger with Aer Lingus to the European Court of First Instance. Ryanair expressed confidence that this prohibition will be overturned saying that:
This is the first time that the Commission has prohibited a merger between two companies which combined will have less than 5 % of the EU market.
This is the first time that the Commission has prohibited an airline merger and reverses a 20 year policy of encouraging EU airline mergers, having previously approved the larger Air France/KLM merger and the Lufthansa/Austrian/Swiss mergers.
This is the first time that an EU airline merger offered guaranteed fare reductions of over €100m p.a. for the benefit of consumers.
This prohibition leaves Aer Lingus exposed as a small, peripheral loss making regional airline which cannot compete with Ryanair on price or punctuality from Dublin (it has recently pulled off another 5 Ryanair routes from Dublin) at a time when the rest of the European industry is consolidating. Aer Lingus lost €70m last year despite an average short haul fare of over €90 (more than double Ryanair’s average fare of €41).
Ryanair confirmed that the prohibition would be bad news for Aer Lingus’ passengers who will continue to suffer higher fares, unnecessary fuel surcharges, poor punctuality and repeated strikes (such as the latest staff walk out just two weeks ago).
Ryanair also criticised the continuing failure of the Board and Management of Aer Lingus to deliver value for its customers or shareholders;
Aer Lingus fares are rising (in line with its IPO strategy).
Aer Lingus has recently raised its unjustified fuel surcharges for long haul passengers.
Aer Lingus has wasted almost €20m of shareholders’ funds to oppose a bid of €2.80 per share when its share price is just €2.60.
Aer Lingus has ordered new long haul aircraft recently when prices are at an all time high.
Aer Lingus has (since Ryanair’s offer) pulled services from 5 more Ryanair routes because it is unable to match Ryanair’s punctuality or prices.
Aer Lingus has supported the DAA’s proposed T2 which will double passenger charges at Dublin and substantially increase Aer Lingus’ costs.
Aer Lingus has presided over a decline in the share price from over €3.00 to just €2.60 yesterday - significantly below Ryanair’s offer price.
Aer Lingus’ actions in recent weeks has damaged its cost base and destroyed significant shareholder value. It would appear that the Board of Aer Lingus is more interested in looking after its own interests and those of the Irish Government than it is in lowering airfares or increasing its share price. In its defence documents, Aer Lingus claimed that Ryanair’s offer of €2.80 per share “devalued Aer Lingus”. How does it now explain or justify a share price as low as €2.60, significantly less than Ryanair’s offer?
Speaking today in Dublin Ryanair’s CEO Michael O’Leary said;
“Aer Lingus claimed yesterday that the EU Commission’s prohibition is ‘another boost for Aer Lingus and for consumers’. This is nonsense. Aer Lingus’ share price is now significantly below Ryanair’s €2.80 offer which means that their shareholders are losing out. The fact that consumers will be denied the Ryanair guarantee of lower Aer Lingus fares and the elimination of fuel surcharges means that they will suffer a penalty of over €100m p.a.
“Aer Lingus is continuing to waste shareholders’ money by ordering new aircraft at the top of the cycle, by supporting expensive T2 facilities at Dublin airport which will double their costs and by wasting almost €20m of shareholders funds to oppose Ryanair’s €2.80 offer. This waste has been reflected in their falling share price.
“We call on Aer Lingus to lower their fares and scrap these unfair fuel surcharges and at least deliver the same value to consumers that Ryanair’s offer would. In the mean time Ryanair will continue to grow, will continue to offer lower fares and will continue to beat Aer Lingus on price and punctuality. We look forward to the European Courts overturning this unprecedented and unlawful prohibition”.