'He never fails to surprise, that man - it's incredible.'This was the reaction of a prominent Irish bookmaker to the shocking news that Ryanair,Europe's leading budget airline, led by its CEO Michael O'Leary, had launched a €1.48bn (El.OZbn)bid for its Irish rival, Aer Lingus, just a week after the flotation of the legacy national earner.' Kyanairrevealed that it had already procured 19.2 per cent of the shares through its stockbroker, Davy, and claimed that its all-cash offer of 62.80 a share represented a 27 per cent premium over the flotation price of C2.20. It intended to retain the Aer Lingus brand and up-grade their dated long-haul product, and reduce their short-haul fares by 2.5 per cent per year for a minimum of 4 years . .. the combination of Aer Lingus and Ryanair into one strong Irish airline group will be rewarding for consumers and will enable both to vigorously compete with the mega carriers in Europe . . .there are significant opportunities, by combining Diepurchasing power of Ryanair and Aer Lingus, to substantially reduce its operating costs, increase efficiencies,and pass these savings on in the form of lower fares to Aer Lingus' consumers.
Among those surprised by the bid were many Ryanair investors, who were concerned that it
could distract the carrier from its heretofore successful ruthless approach to cost cutting, by taking
on an airline with long-haul routes. In the past it had made a successful acquisition, but it was of a
small (2 million passengers) Dutch budget, shorthaul carrier. Buzz, which was easily absorbed.
While perceived as a departure from its organic growth model, that deal had nevertheless been
greeted as a coup for Kyanair. Apart from the bargain purchase price, it was a golden opportunity
to pick up a ready-made bundle of take-off and landing slots at London Stansted Airport.
It had been quite an achievement by the Irish government finally to have floated Aer Lingus after many false starts and much agonising over a number of years. Once they recovered their collective breaths, Aer Lingus and its board firmly rejected the Ryanair approach. They said Ryanair had acted in 'a hostile, anticompetitive manner designed to eliminate a rival at a derisory price'. A combined Ryanair-Aer Lingus operation would account for 80 per cent of all flights between Ireland and other European countries. Aer Lingus Chief Executive Dennot Mannion said his company was fundamentally opposed to a merger with Ryanair, even if it raises its price. 'I cannot conceive of the circumstances where the Aer Lingus management and Ryanair would be able to work harmonious!}'together', Mannion said in an interview. 'This is simply a reflection of the fact that these organisations have been competing head to head, without fear or favour, for 20 years. It would be like merging Manchester United and Liverpool football clubs. You just wouldn't do it.