Ryanair Offers to Sell Part of Aer Lingus
Ryanair Holdings PLC (RYA.DB, RYAAY) has offered to sell off part of Aer Lingus Group PLC's (EIL1.DB) business to a regional U.K. airline in a bid to secure clearance from European Union regulators for its merger bid, a person familiar with the negotiations said Tuesday. In its latest package of concessions, Ryanair has put Flybe Group PLC (FLYB.LN) forward as an upfront buyer for around half of the Aer Lingus business, the person said. Flybe would take over 43 of the Irish carrier's routes, while British Airways, a unit of International Airlines Group PLC (IAG), would operate fewer routes than originally foreseen, but would hold onto the three lucrative London Heathrow to Dublin routes. BA would then be able to retain the coveted landing slots after three years. Under an earlier offer, Flybe would have operated a number of routes but the latest bid, submitted last week to the European Commission, envisages a far greater role for the carrier. It would also take over some of Aer Lingus's infrastructure and offices, the person said. "They have relinquished their old remedies package and have indeed come up with something pretty radical," the person said. One legal expert said that Ryanair's original proposal to give up Heathrow slots to British Airways could have created another competition issue. The EU may also want Ryanair to give up routes where Aer Lingus would have been an obvious competitor, the expert said. "The Commission may want Ryanair to go all in and give up all Dublin slots where Aer Lingus would be an obvious entrant," he said. However, the offer could struggle to cut muster with regulators, given Flybe's shaky finances which could be compounded by taking on many unprofitable routes, the first person said. While Flybe is Europe's largest regional airline, it has issued five profit warnings since going public two and a half years ago. Last August it cut its full-year revenue target due to the impact of continued weak consumer demand and stubbornly high oil prices. It currently operates a fleet of 85 planes across Europe. The European Commission wouldn't comment on the reports. A spokesman for Flybe also declined to comment. Ryanair Chief Executive Michael O'Leary said in an interview Tuesday that he hoped for a "positive outcome" from the commission to his latest so-called "remedies" package. Speaking to Bloomberg in Rome, he said it was "a question of spending time with the commission working through the commission's concerns, trying to tweak the remedy so we ensure that we address the commission's competition concerns and we come up with the best deal for Irish consumers and visitors." Europe's biggest airline renewed its pursuit to snap up its rival, in which it currently holds a stake of 29.8%, in June. The commission threw out an earlier bid saying it would create a monopoly for Irish flights. The Irish government has also come out against the 694 million euro ($924 million) bid. It is Ryanair's third attempt to buy the airline in the last six years and part of the carrier's plans to expand at a time when tough conditions in the European market have led to the collapse of several regional airlines in the face of spending cuts and rising fuel costs. The commission, which is expected to make a final decision by the end of February, is market-testing the new measures over the next few days, one person said. The commission typically garners reactions from third parties of proposed concessions as part of its decision-making process. Write to Vanessa Mock at
[email protected] and Marietta Cauchi at
[email protected] Subscribe to WSJ:
The Wall Street Journal - Breaking News, Business, Financial and Economic News, World News & Video - Wall Street Journal - Wsj.com