Ryanair proposed takeover of Aer Lingus

[Humpback]

Not getting into the nitty gritty on this, but after reading this quote, I'm wondering if the Chairman of the Board of Aer Lingus actually really understands what it means to be floated on a stock exchange at all.

Speaking of the takeover approach by Ryanair, John Sharman, chairman of Aer Lingus group, said:

This approach is unsolicited, wholly opportunistic and significantly undervalues the group’s businesses and attractive long-term growth potential.

How can this be undervaluing the Aer Lingus business, when the government in it's wisdom valued the company at €2.20 per share. Ryanair have valued it at a 30% premium to that, which indicates that it was actually the government which undervalued Aer Lingus in the first place.

 

[ninsaga]

Lets just say that they did work through the unions, esot, trade commissions, etc & that Aer Lingus did sell to Ryanair for what ever price.... will it realy be the best thing for the Irish traveller/consumer? Without serious competition from a big player such as Aer Lingus.... who knows what stunts Ryanair might pull if they are the main player.

I don't think its the best thing for us. I would prefer to see Willie Walsh 7 co making a pitch for Aer Lingus.

ninsaga

 

[Meccano]

Lets just say that they did work through the unions, esot, trade commissions, etc & that Aer Lingus did sell to Ryanair for what ever price.... will it realy be the best thing for the Irish traveller/consumer? Without serious competition from a big player such as Aer Lingus.... who knows what stunts Ryanair might pull if they are the main player.

Ryanair running a long-haul service out of Ireland? I doubt it.
Or, if it did happen, it'll be the same pile 'em high sell 'em cheap version they do on short haul.

Ok for back-packers and students, and no doubt a whole new class of 99cent air travellers would emerge. But if you don't fit into those categories - your only choice is to toddle off to London for your long haul flying.

And you won't be going to London on a cheapo Ryanair flight. One of his first moves will be to flog the LHR slots, probably recouping him a large chunk of his outlay in one stroke.
It'll be Stansted - and the M25.

 

[smiley]

totally hilarious...the chairman totally made a plonker out of himself...he and the government sold the airline at a price...now he says the airline is worth more than the price they floated at....

you must admit its great crack to stand back and watch this carry on...

the government now look like proper twits...

and what are what the hell are siptu on about? They also agrred to float the company..and now they want the government to but it back!!!!

its getting better by the hour!!

go on michael oleary!!

 

[DrMoriarty]

It guts me to say anything in praise of Michael O'Gecko, but this has me in stitches. What odds would you have given, 15 short years ago..?

He should be made President. Of Nigeria, or Sierra Leone, or somewhere...

(After he becomes CEO of Ireland, Inc., naturally!)

 

[ClubMan]

But if you don't fit into those categories - your only choice is to toddle off to London for your long haul flying.

Aer Lingus are not the only long haul operator working out of Dublin - e.g. AA, Continental, Delta, US Airways and Aer Transat to North America, for example.

 

[Guest127]

aer lingus currently have 400,000 seats advertised on their website at bargain rates. the sale price advertises as flying up to 13th feby. one of the destinations ( one I would be interested in for a weekend break) is palma majorca. but when you dial in the dates it says that the flights to palma majorca stopped in october 2006. bit like a butcher advertising cheap christmas toys? to be fare most of the other destinations appear to available

 

[Meccano]

Clubman, I guess so, as long as you feel confident in those US airlines long term unfailing commitment to providing DIRECT access to International routes ex-Ireland forever more, come hell or high water.

I don't.

You can also forget all those new routes East-Bound that Mr.Mannion was about to launch. Who'd be bothered now? No previous interest shown!

cuchulainn, there's a good chance Aer Lingus won't even exist next February! You're an optimistic chap to book that far in advance.
Micko will probably scrap a lot of the services as quick as he can.

Whoever advised 'de guvmint' about the flotation really DO have egg on their faces. I can understand Cullens and Bertie's desire for a succesful flotation - didn't want a repeat of Eircom - but it seems to me that too many people really believed all the negative hysteria about the company...you remember "Aer Lingus is useless - worthless - give it away....." etc etc and they fell over themselves to do exactly that. Give it away.

But the truth is out now - Micko is ready to punt 1 billion to get it. Thats the best vote of confidence the company ever had, and from a 'business genius' too.
So I guess that shoots down the past detractors in flames. Too late unfortunately.

The tax payer has been shafted. The fat cats will get more cream. Irish tourism will suffer. Business will suffer. Punters will have no choice. Competition will dissapear.
Grand job so.

 

[ClubMan]

Clubman, I guess so, as long as you feel confident in those US airlines long term unfailing commitment to providing DIRECT access to International routes ex-Ireland forever more, come hell or high water.

Do you expect any commercial company (including Aer Lingus - whether or not Micko gets his hands on it) to give such a guarantee?

Micko will probably scrap a lot of the services as quick as he can.

Pure speculation.

Whoever advised 'de guvmint' about the flotation really DO have egg on their faces. I can understand Cullens and Bertie's desire for a succesful flotation - didn't want a repeat of Eircom - but it seems to me that too many people really believed all the negative hysteria about the company...you remember "Aer Lingus is useless - worthless - give it away....." etc etc and they fell over themselves to do exactly that. Give it away.

Yeah - the Government should have forced us all into this one given the share price performance since IPO. What a rip off!

 

[Meccano]

Do you expect any commercial company (including Aer Lingus - whether or not Micko gets his hands on it) to give such a guarantee?

Perhaps not, but I'd have trusted Aer Lingus (in the proper hands) to hang on to the very bitter end - as they did for years, even when everyone else was pulling out.
Wouldn't it be fun now if Ireland and the US were ever to have a little 'tiff', and the US Government were to apply some minor 'economic sanctions' on us?
'Discouraging' US carriers from operating our transatlantic services for a while would be a quite effective method, no?
Absence of STRATEGIC THINKING Clubman.
Maybe you should stand for election. FF or PD?.

Pure speculation.

So was the notion of Ryanair buying Aer Lingus 48 hours ago!

Yeah - the Government should have forced us all into this one given the share price performance since IPO. What a rip off!

They've proven they couldn't organise a p*** up in a brewery.

 

[Guest127]

few points: the price was obviously too low so howsabout the companies getting millions for the advice paying back the difference ie so many shares @ 2.80 minus shares at 2.20 and the difference to be refunded to the government out of their fees. No chance of course. if willie walsh had been given his head a few years ago and then a/l floated the share price would probaby have been nearer to €5 but bertie was too busy counting the interest he was saving on loans to bother about little things like that.
agree that michael probably will have little time for the dubai routes. shouldnt forget that a lot of the bigger state airlines now have a discounted airline to compete with ryanair so he might turn the tables on them and put a/l in to compete with them. wouldnt that be fun. and we shouldnt forget that ryanair dont compete with aer lingus on a good few routes but are still ok pricewise if you book early. gas if he used the heathrow slots for his bigger and newer boeing jets. wouldnt think airbus industries are too happy either as aer lingus appear to favour them over boeing. plenty of fun in the days ahead. wonder if paddy power are giving odds?

 

[ClubMan]

Wouldn't it be fun now if Ireland and the US were ever to have a little 'tiff', and the US Government were to apply some minor 'economic sanctions' on us?
'Discouraging' US carriers from operating our transatlantic services for a while would be a quite effective method, no?
Absence of STRATEGIC THINKING Clubman.

Strategic thinking? Paranoid delusions more like...

Maybe you should stand for election. FF or PD?.

Huh?!

They've proven they couldn't organise a p*** up in a brewery.

In case you didn't notice I was being facetious.

 

[Meccano]

Maybe YOU didn't notice so was I?
I'll try to emote more in future.

Cuchullain, I really doubt if O'Leary would want to serve LHR. Honestly, all messing aside, its just a no-brainer that he'll avoid the hassle with delays that is part and parcel of ops in there. It just doesn't fit the Ryanair shorthaul model.
And even more importantly, selling the LHR slots will recoup around 250 Million of his expenditure on the company - effectively buying him 25% at the 1 Billion euro capitalisation mark. No doubt he'll find ways to strip out a few more assetts, recouping the other 250M for the second 25% required to give him a majority stake.
Effectively getting him the company FOR FREE.

I had to laugh at his comments this morning - he sat there with a straight face and said he'd not only keep Aer Lingus separate, but UPGRADE their long-haul business class product. What a joker!!

By the way, lest we forget, Ryanair have previously bought out a smaller competitor with promises of running them parrallel to the Ryanair mainline.
The companies name was 'Buzz'. Anyone remember it?
O'Leary stripped what he wanted out of it, and wound it up within months. Another annoying competitor squashed and eliminated.
Watch this space.

 

[CGorman]

The tax payer has been shafted.

??? Whilst it's quite unclear whether Ryanair will succeed in a full takeover - if they did the gov. (e.g. the taxpayers) will get far in excess of €500m. How does that constitute being "shafted"? The figure would likely be much greater as any takeover is unlikely to be achieved at €2.80 a share - more like €3+.

You can also forget all those new routes East-Bound that Mr.Mannion was about to launch.

Well the plan is to run Aer Lingus as a seperate brand and indeed as a seperate company. I'd imagine most existing short haul flights would be brought under the Ryanair brand (with all it's cheap and cheerlessness to bout) whilst the Aer Lingus brand would be positioned as a pure long haul carrier (cheap and cheerless with a dash of humanity such as a glass of water or even a scone on flights lasting over 7hrs!!) To me this would be the logical method.

Rather than shy away from new long haul routes by Mr. Mannion, i'd expect Ryanair to pursue a far more aggressive expansion plan. At very least Aer Lingus would set up a long haul base outside Ireland within the coming years - use those Heathrow slots for non-ireland routes if that's allowed. Or even use an existing Ryanair airport such as Gironia or Frankfurt to split ground overheads.

Obviously all commentry is based upon a quite uncertain positive outcome in the takeover attempt. IMHO, I think the whole thing is a no brainer for O'Leary - if he wins that's perfect, if not then he can slowly sell off the 20% over the next year or so at a decent profit - Ryanair has bought in between €2.20 and €2.80 or so... probably an avg. price of €2.45 or so and even before the takeover attept the share price looked like it would hit well above that based purely on the firms own figures and potential. Also Ryanair has garnered yet more publicity...

 

[CGorman]

The companies name was 'Buzz'. Anyone remember it?
O'Leary stripped what he wanted out of it, and wound it up within months. Another annoying competitor squashed and eliminated.

I don't think the two operations are comparable. Buzz was a very new, loss making, poorly run firm that did'nt own a single plane and was eventually sold for scarcely €20m. Buzz was always a financially sound deal on paper - it was a no brainer from that perspective.

By contrast Aer Lingus is a long established brand name with actual ownership of 39 aircraft operating 60 routes - with an initial takeover price of €1.5bn and thats more likely to be near €2bn if a deal is to happen. Also Aer Lingus is far better run today than Buzz ever was and it's actually a decent profit maker to bout.

O'Leary is an "empire builder". He thrives on the thought of conquering aviation. He knows the Ryanair model is and will continue to work on cheap short haul - it's just a simple join up the dots game and as he said himself (AFAIK) "just try not to f**k it up".

Aer Lingus offers him the chance to conquer a completely new market. Mannion is an expert in long haul and it's quite obvious the Ryanair model would need significant tweaking to work in long haul. So IMHO, this is truely an attempt to create an empire - a strong Irish avation giant. You might think me mad, but I can see the day Ryanair are launching such routes as Beijing-Tokoyo, or Cape Town-Johannasburg!! Admitably the timescale is decades away and rests on the assumption that they dont "f**k up" before that - but I truely believe that's the sort of growth O'Leary believes Ryanair could eventually have.

It's worth nothing O'Leary intends to retire in 2008 - but that doe'snt mean Ryanair will just stop.

 

[Meccano]

??? Whilst it's quite unclear whether Ryanair will succeed in a full takeover - if they did the gov. (e.g. the taxpayers) will get far in excess of €500m. How does that constitute being "shafted"? The figure would likely be much greater as any takeover is unlikely to be achieved at €2.80 a share - more like €3+.

De guvmint SOLD more than 50% of the companies shares at launch - for 2.20 euro. It appears O'Leary has bought 19% at an average of about 2.50 euro per share and is still buying at 2.80 per share. That means De guvmint has thrown away between 15% and 25% of the TRUE value they could have achieved. I read somewhere that O'Leary is expected to pay up to 3.20 per share to gain a controlling stake.
The loss to taxpayers is therefore in the region of 150M to 350M euro.

Well the plan is to run Aer Lingus as a seperate brand and indeed as a seperate company. I'd imagine most existing short haul flights would be brought under the Ryanair brand (with all it's cheap and cheerlessness to bout) whilst the Aer Lingus brand would be positioned as a pure long haul carrier (cheap and cheerless with a dash of humanity such as a glass of water or even a scone on flights lasting over 7hrs!!) To me this would be the logical method.

Rather than shy away from new long haul routes by Mr. Mannion, i'd expect Ryanair to pursue a far more aggressive expansion plan. At very least Aer Lingus would set up a long haul base outside Ireland within the coming years - use those Heathrow slots for non-ireland routes if that's allowed. Or even use an existing Ryanair airport such as Gironia or Frankfurt to split ground overheads.

Obviously all commentry is based upon a quite uncertain positive outcome in the takeover attempt. IMHO, I think the whole thing is a no brainer for O'Leary - if he wins that's perfect, if not then he can slowly sell off the 20% over the next year or so at a decent profit - Ryanair has bought in between €2.20 and €2.80 or so... probably an avg. price of €2.45 or so and even before the takeover attept the share price looked like it would hit well above that based purely on the firms own figures and potential. Also Ryanair has garnered yet more publicity...

To quote Clubman - This is PURE SPECULATION.
Tsk Tsk.

By the way Clubman, on the subject of 'paranoid delusions' did you know that the US government once (late 70's) blocked Boeing from selling spares to Aer Lingus because they had done business with Gaddafi's Libya in breach of a US trade embargo?
Betcha didn't know that, eh, eh!?

 

[Purple]

The loss to taxpayers is therefore in the region of 150M to 350M euro.

Think of all the E-Voting machines they could have bought for that!

 

[Sunny]

Cuchullain, I really doubt if O'Leary would want to serve LHR. Honestly, all messing aside, its just a no-brainer that he'll avoid the hassle with delays that is part and parcel of ops in there. It just doesn't fit the Ryanair shorthaul model.
And even more importantly, selling the LHR slots will recoup around 250 Million of his expenditure on the company - effectively buying him 25% at the 1 Billion euro capitalisation mark.

Protection of the Heathrow slots is written into the company's articles of associaton. Realistically, if the government retain 25% of the company, the slots can't be sold without their permission. Why this is the case I don't know. Could never understand the hang up about getting access to that airport. There are other major hubs that are much easier to use when having to get connecting flights and if the demand is there for the DUB-LHR route, some airline will always provide it.

 

[Humpback]

It may be a possibility that Ryanair and Michael O'Leary are looking at the JetBlue model from the US and the possibility of applying it to Aer Lingus. Set up as a low cost carrier, but with a premium service.

This, to me, would make absolute sense. Short-haul Aer Lingus flights would be rebranded as Ryanair. Long-haul flights remain branded as Aer Lingus, working on a JetBlue model.

Not that Aer Lingus is too far away from the JetBlue model at this stage anyway.

 

[Humpback]

Protection of the Heathrow slots is written into the company's articles of associaton.

Did anyone hear our Transport Minister in the Dail yesterday saying that because the Articles of Association of Aer Lingus couldn't be changed, that there were protections in place?

Yet again a ridiculous pronouncement by a key player in this saga who hasn't a clue what they're talking about. If Michael O'Leary is up against Martin Cullen and John Sharman (from OP comments), then he's got absolutely nothing to worry about.