Aer Lingus Says 'No' To A Ryanair Takeover

Irish 'flag carrier' (this term his been disputed) Aer Lingus has recieved, and promptly rejected, a $1.9 billion (£1 billion) takeover offer from low-cost archrival Ryanair. The reason? The bid "significantly undervalues the group's businesses and attractive long term growth potential", according to the Aer Lingus board. Of course, the real reason could be that Aer Lingus, which has a rich history as a full-service, international airline, doesn't want to be bought out by Ryanair, which has gone from being a dowdy puddlejumper of an airline to one of Europe's largest in a little over ten years.

Michael O'Leary, Ryanair's outspoken boss, called the potential takeover a 'strong opportunity' to create a new airline that would carry over 50 million passengers a year. The airlines would, however, be operated seperately, and in some cases even compete on some routes.

The Irish government could also be an obstacle to any future plans that Ryanair may have regarding an Aer Lingus takeover. It owns 28.3% of Aer Lingus, and although Ryanair has said it would be 'happy' if the government kept its shares, I'm not sure whether the government would be happy to see itself holding 28.3% of an airline that has frequently clashed with governments in other countries.

The deal might also have had some problems with the anti-trust groups: a combined Aer Lingus-Ryanair coalition would carry a huge 78% of passengers between London and Dublin.

The two airlines, though, aren't as different as some think. Aer Lingus used to be a mostly full-service airline, yet in the past five years it has significantly changed its business model, cutting back on some services and opening new routes to mainland Europe (before, it flew primarily to England and the US). Now, Aer Lingus tries to market itself as a low-fare airline, much like Ryanair.

Could a takeover still happen? If it did, Ryanair would have to significantly boost its purchasing price. (It already owns 16% of Aer Lingus.) And the combined group would have to drop some routes and/or frequencies to avoid trouble with anti-trust agencies.