Ryanair - 3
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From a market point of view, FR's bid should go ahead simply because EI is worth much more if owned by FR: potential FR competition is a key factor limiting the EI share price. Whenever he wants, MOL can drive EI into loss by launching services head-to-head on its short haul business routes. It's just announced this for DUB-MAD, why not CDG and FRA next?
However, the combined group's 78% share of the LON-DUB route will be a big problem for competition authorities, particularly as it is impossible for a new entrant to get LHR slots and hard to get LGW slots. LON-DUB is Europe's largest route by pax numbers so the EC will be looking closely... and they don't like FR.
However, the combined group's 78% share of the LON-DUB route will be a big problem for competition authorities, particularly as it is impossible for a new entrant to get LHR slots and hard to get LGW slots. LON-DUB is Europe's largest route by pax numbers so the EC will be looking closely... and they don't like FR.
Taildragger is Spot On.
Taildragger is spot on. Who is advising Ryanair? What will the combined balance sheets look like? My guess (and I havent looked at my own consolidation yet) is that Ryanair's balance sheet is pretty weak and that if the can get hold of EI for a pittance, they can shore up their own balance sheet.
As for "economies of scale" thats BS. Ryanair is already large enough to have "economies of scale" and in fact once you reach a certain size, you get diminishing returns from growing further.
If I was the Board of EI right now, I would have already commisioned my own analysis of Ryanairs current financial position plus my own analysis of EI's value.
If you can then prove that the whole of a merged EI and Ryanair is less than the sum of its parts then voila! Tiny Rolands did this to Bond Corporation when Bond tried to take over Lonrho many years ago - it was the start of the downward Bond spiral.
As for "economies of scale" thats BS. Ryanair is already large enough to have "economies of scale" and in fact once you reach a certain size, you get diminishing returns from growing further.
If I was the Board of EI right now, I would have already commisioned my own analysis of Ryanairs current financial position plus my own analysis of EI's value.
If you can then prove that the whole of a merged EI and Ryanair is less than the sum of its parts then voila! Tiny Rolands did this to Bond Corporation when Bond tried to take over Lonrho many years ago - it was the start of the downward Bond spiral.
Last edited by Sunfish; 5th Oct 2006 at 22:23.
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I think it would be a disaster. MOL stated today that he would "improve EI services" - the man certainly has a sense of humour..! He can't do too much more to reduce the existing services he provides on FR.
He has no regard for staff, and even less for customers. They are a mere inconvenience, but must be taken as a means to an end in order to line his already deep pockets.
Whilst EI has had to reduce costs/prices, and many changes have taken place, they at least appear to offer a service, and their staff seem to be more content than then counterparts.
It's very unlikely that FR are going to be interested in LHR - sell the slots - thus more revenue. Let FR "service" the European routes, until finally, the EI brand has disappeared.
FR have a policy of generally flying to smaller airports; I would see it as unlikely that FR would commence flying to the major airports even if as an attempt to knock EI off some of the routes. The deals already in place at the smaller airports would not be available. Increased charges, thus higher fares, etc, not FR style. (Anyway, he probably wouldn't get the same satisfaction in abandoning pax at a major airport where alternatives may be available
. Much more fun to cx a flight from an airport that has very little on offer, never mind the next available flight being a week later).
Interesting though, his approach to the competition authority - he has for a long time made reference that through competition, he has managed to lower airfares and made airtravel possible for many people. However, in buying EI, competition will ultimately be reduced! And that can only mean an increase in airfares!!
Whilst the unions will likely put up a fight, EI could be wiped out - anyone remember BUZZ?
No, I have flown with both carriers, and I do like to be able to choose whether to be treated with some dignity, or alternatively, be treated as though I'm getting on a cattle truck to be dropped in the middle of nowhere, miles from my destination.
He has no regard for staff, and even less for customers. They are a mere inconvenience, but must be taken as a means to an end in order to line his already deep pockets.
Whilst EI has had to reduce costs/prices, and many changes have taken place, they at least appear to offer a service, and their staff seem to be more content than then counterparts.
It's very unlikely that FR are going to be interested in LHR - sell the slots - thus more revenue. Let FR "service" the European routes, until finally, the EI brand has disappeared.
FR have a policy of generally flying to smaller airports; I would see it as unlikely that FR would commence flying to the major airports even if as an attempt to knock EI off some of the routes. The deals already in place at the smaller airports would not be available. Increased charges, thus higher fares, etc, not FR style. (Anyway, he probably wouldn't get the same satisfaction in abandoning pax at a major airport where alternatives may be available
. Much more fun to cx a flight from an airport that has very little on offer, never mind the next available flight being a week later).Interesting though, his approach to the competition authority - he has for a long time made reference that through competition, he has managed to lower airfares and made airtravel possible for many people. However, in buying EI, competition will ultimately be reduced! And that can only mean an increase in airfares!!
Whilst the unions will likely put up a fight, EI could be wiped out - anyone remember BUZZ?
No, I have flown with both carriers, and I do like to be able to choose whether to be treated with some dignity, or alternatively, be treated as though I'm getting on a cattle truck to be dropped in the middle of nowhere, miles from my destination.
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Fr guys are looking forward to a four sector Dublin-Boston-dublin-JFK-Dublin with 20 minute turnarounds, does Mol realise that means his pilots will now have to work more than the 18 hours a week they work now!
As for an EI takeover, I suppose that it's one way of getting rid of low fare competition out of DUB.
Also, could it be possible to separate the international (non EU) routes from Aer Lingus? Fly those with a new non-union LoCo operation within FR and let EI wither away into oblivion.
According to The Daily Telegraph, Ryanair have £ 2 billion in the bank......
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Actually the point has been raised - and it's a valid one - that if EIN's directors only recently signed off the prospectus and accepted a certain valuation, how can they now say that RYA's rather higher offer 'undervalues the business' unless there has been a material adverse change in EIN's situation, in which case they should have re-written the prospectus?
Floats usually do go off at a discount to fair value so that it rockets up on day one and looks good on the market. But it's disingenuous for EIN's directors to say that RYA's offer 'seriously 'undervalues the business' because by implication they're then saying that they even further undervalued it when setting the float price - in which case the Irish finance minister should be all over them like a rash.
He's backed EIN's board into a very sticky corner, if nothing else. Let's say the current offer is his first shot and he bumps it up to a 33% premium over the float price... At what point is the balance struck between a fair(er) value and the directors implicitly admitting they stuffed the float up?
Floats usually do go off at a discount to fair value so that it rockets up on day one and looks good on the market. But it's disingenuous for EIN's directors to say that RYA's offer 'seriously 'undervalues the business' because by implication they're then saying that they even further undervalued it when setting the float price - in which case the Irish finance minister should be all over them like a rash.
He's backed EIN's board into a very sticky corner, if nothing else. Let's say the current offer is his first shot and he bumps it up to a 33% premium over the float price... At what point is the balance struck between a fair(er) value and the directors implicitly admitting they stuffed the float up?
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dont forget the 'national airline' snobbery factor. unlike any airline I've ever known Aer Lingus attracts fiece loyalty from the Irish public and politicos (rightly or wrongly).
what i would bet my hat on is that very few of them would want AL to be 'sullied' by the 'rough diamond' nature of FR. It might make good business sense eventually and I don't doubt AL would bloom under MOL but the two under the same umbrella would be simply too much for some to bear- thus expect it to get strong opposition from the dail and the TDs.
personally I think it's a great idea and will watch with interest.
next move is Easy to buy BA................
what i would bet my hat on is that very few of them would want AL to be 'sullied' by the 'rough diamond' nature of FR. It might make good business sense eventually and I don't doubt AL would bloom under MOL but the two under the same umbrella would be simply too much for some to bear- thus expect it to get strong opposition from the dail and the TDs.
personally I think it's a great idea and will watch with interest.
next move is Easy to buy BA................
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I believe the Irish Government own 25%, and the employees hold shares too. Shouldn't think they'd want to work for MOL, but they might sell and seek a new job elsewhere.
I can't help but think MOL's main reason for trying this is the same as why a dog licks its own balls.
(Because he can)
I can't help but think MOL's main reason for trying this is the same as why a dog licks its own balls.
(Because he can)
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and Ryanair is being advised by Morgan Stanley, amongst others)As for competition.. I spoke with MoL yesterday
and he's certainly well prepared for this battle. His lawyers have already prepared their submission to the EU Competition regulator. But yes, you're right, the regulators will NOT accept any argument that running the two seperately constitutes 'competition' in the way it does between two seperately owned entities. The people who will be losing the most sleep over this will be BA. IMO, this deal is all about securing slots at LHR - the most prized (and scarce) asset in global aviation. It's almost a once-in-a-lifetime opportunity whereby 24 slots at LHR become available in one big block. The nly other slots sold over the last 4 years have been some of Swissairs, a couple of Uniteds (when they announced stopping of LHR-JFK services) and Malev's switch to LGW.
Only going to buy AI and simply apply his low-cost model to it but not touch anything else? Bullsh*t.
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As dawn raider says "Aer Lingus attracts fierce loyalty from the Irish public"
You're damn right it does. Anyone with a memory that extends back before the current boom will remember Aer Lingus pretty much the same way a lot of people remember Guinness's back in the good old days. These were the golden companies. These were the best big companies in Ireland to work in bar none with good conditions and great pensions. Also the products were pretty excellent too! However in the case of Aer Lingus people did overlook the fact that a flight from Ireland to the UK was overpriced by a factor of about 4 until real competition arrived in the form of Ryanair. Otherwise the experience was positive, very positive. So many times I flew home after yet another goddamn awful business trip in America or Europe and when I saw a big green Aer Lingus Boeing sitting at the gate I just felt I was home already. And in a sense I was, it was a real slice in Ireland. Friendly cabin crew with a sense of humour and time to talk to the passengers. So that is the image so many people in Ireland still have of Aer Lingus. All the great company conditions and passenger service are nearly all gone now from Aer Lingus and it never existed in Ryanair in the first place. And if somehow MOL takes over it will be finally gone forever. But that is where the loyalty comes from - memory.
You're damn right it does. Anyone with a memory that extends back before the current boom will remember Aer Lingus pretty much the same way a lot of people remember Guinness's back in the good old days. These were the golden companies. These were the best big companies in Ireland to work in bar none with good conditions and great pensions. Also the products were pretty excellent too! However in the case of Aer Lingus people did overlook the fact that a flight from Ireland to the UK was overpriced by a factor of about 4 until real competition arrived in the form of Ryanair. Otherwise the experience was positive, very positive. So many times I flew home after yet another goddamn awful business trip in America or Europe and when I saw a big green Aer Lingus Boeing sitting at the gate I just felt I was home already. And in a sense I was, it was a real slice in Ireland. Friendly cabin crew with a sense of humour and time to talk to the passengers. So that is the image so many people in Ireland still have of Aer Lingus. All the great company conditions and passenger service are nearly all gone now from Aer Lingus and it never existed in Ryanair in the first place. And if somehow MOL takes over it will be finally gone forever. But that is where the loyalty comes from - memory.
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True words, I'm sure.
As dawn raider says "Aer Lingus attracts fierce loyalty from the Irish public"..
So many times I flew home after yet another goddamn awful business trip in America or Europe and when I saw a big green Aer Lingus Boeing sitting at the gate I just felt I was home already. And in a sense I was, it was a real slice in Ireland...
So many times I flew home after yet another goddamn awful business trip in America or Europe and when I saw a big green Aer Lingus Boeing sitting at the gate I just felt I was home already. And in a sense I was, it was a real slice in Ireland...
Wind the clock back 15 years and replace
Aer Lingus with Swissair
Ireland with Switzerland
Irish with Swiss
Boeing with MD-11 (ahem
)Now spin forward to the present.
Stop and think "why didn't I become a Doctor instead of wanting to work for an airline?".
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I've only ever flown Aer Lingus once, and the experience was pretty awful, the plane was dirty, and there were no frills either. It was a LHR to Dublin shuttle service, and if I recall, I had to purchase my drink on board too.
I assume then that long haul on Aer lingus is somewhat different?
I assume then that long haul on Aer lingus is somewhat different?
Too mean to buy a long personal title
Actually the point has been raised - and it's a valid one - that if EIN's directors only recently signed off the prospectus and accepted a certain valuation, how can they now say that RYA's rather higher offer 'undervalues the business' unless there has been a material adverse change in EIN's situation, in which case they should have re-written the prospectus?
Floats usually do go off at a discount to fair value so that it rockets up on day one and looks good on the market. But it's disingenuous for EIN's directors to say that RYA's offer 'seriously 'undervalues the business' because by implication they're then saying that they even further undervalued it when setting the float price - in which case the Irish finance minister should be all over them like a rash.
Floats usually do go off at a discount to fair value so that it rockets up on day one and looks good on the market. But it's disingenuous for EIN's directors to say that RYA's offer 'seriously 'undervalues the business' because by implication they're then saying that they even further undervalued it when setting the float price - in which case the Irish finance minister should be all over them like a rash.
It is difficult to imagine that the airline was privatised at an unduly low price, seen from the point of view of the institutional investor. Otherwise, the price would have rocketed immediately it came to market as everyone tried to get their hands on a bargain. Clearly it wasn't seen as such.
Once a company is in play, though, everyone's perception of the value of the business changes simply because the value is altered by the very fact that someone has said that they are prepared to pay more for it than had previously been the case.
So two areas of question arise:-
- [*]
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I will add that Long-haul travel with AL is pretty c**p as well in BOTH classes.
IFE's where available are way behind the competition and "Premier class" (Business Class) is really terrible.
So not sure what people are talking about here when they mention "Service"
IFE's where available are way behind the competition and "Premier class" (Business Class) is really terrible.
So not sure what people are talking about here when they mention "Service"
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Price - The perception of value.
1) Because he can buy his only competitor in Ireland. Even without this Ryanair bid, Aer Lingus was the most profitable national airline in Europe on a margin basis. As it is , it is a great business and definately dumbed down for the floatation over the last few years. This was started by WW when he tried to buy it cheap himself. The real potential of Aer Lingus has yet to be realised.
It buys MOL huge clout in Irish Aviation decision making with respect to the IAA and Dublin Airport Authority. It buys him many buildings, equipment and facilities at Dublin Airport which he can use for Ryanair.
2) Yes very interesting point, but this question is surely asked of all hostile takeovers of companies?
The Heathrow slots is an interesting point. The Irish government has put in safeguards to prevent the slots being sold immediately to the highest bidders, Etihad, Emirates, and Qatar spring to mind. These slots will be worth even more with US/EU open skies when there could be the potential for any carrier with slots at Heathrow to fly anywhere it chooses!!!!
So two areas of question arise:-
Why does MO'L think that the business is worth more than the institutional investors thought? What is the extra value of the business to him, as opposed to anyone else?
Why does he think that it is worth spending €1.4bn buying this business rather than spending the same amount of money growing his own at the expense of this business?
Financial experts will no doubt have some views about whether, and if so what, this says about the health of and organic growth prospects for Ryanair on its own.
Why does MO'L think that the business is worth more than the institutional investors thought? What is the extra value of the business to him, as opposed to anyone else?
Why does he think that it is worth spending €1.4bn buying this business rather than spending the same amount of money growing his own at the expense of this business?
Financial experts will no doubt have some views about whether, and if so what, this says about the health of and organic growth prospects for Ryanair on its own.
It buys MOL huge clout in Irish Aviation decision making with respect to the IAA and Dublin Airport Authority. It buys him many buildings, equipment and facilities at Dublin Airport which he can use for Ryanair.
2) Yes very interesting point, but this question is surely asked of all hostile takeovers of companies?
The Heathrow slots is an interesting point. The Irish government has put in safeguards to prevent the slots being sold immediately to the highest bidders, Etihad, Emirates, and Qatar spring to mind. These slots will be worth even more with US/EU open skies when there could be the potential for any carrier with slots at Heathrow to fly anywhere it chooses!!!!
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For the reason I posted yesterday. We might not expect FR to go head-to-head with EI on its profitable routes in order to squash it, but there will always be that risk, and investors will take that into account in determining the value of EI. The threat of FR competition therefore suppresses the market value of EI. FR ownership of EI removes this risk and so EI is worth more under FR ownership than if owned by anyone else.
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Interesting development here - MO'L says that even if FR doesn't succeed in getting a majority shareholding, it will still remain a long term shareholder in Aer Lingus.
http://today.reuters.co.uk/news/arti...CEO-URGENT.XML
That may be a more comfortable position, for a few reasons:
- He won't be in charge,
- It would act as an insurance policy against FR being dumping capacity in DUB, to bury EI (which would be a possibility),
- EI could still benefit from FR's purchasing power, particularly on the long haul (and indeed, it might dissuade FR/MO'L from going down that road?). As things stand, Airbus is wobbling badly and rumours are that the A350 may not even go ahead, so it's probably a fair bet that EI will choose the 787.
Would people be comfortable having FR as a minority shareholder (although FR would still be seeking to increase its shareholding)?
Although the govt said today that it was considering legal action to stop FR, I would see that as posturing, since it appeared as recently as this morning that the govt could fall and this would be a particularly inconvenient issue to come up during an election, so they had to be seen to do something?
Finally, what became of the rumour that "a certain M/E airline" was buying up shares; there's a distinct absence of an Omar Sharif-like figure riding approaching through the desert in the distance ...
http://today.reuters.co.uk/news/arti...CEO-URGENT.XML
That may be a more comfortable position, for a few reasons:
- He won't be in charge,
- It would act as an insurance policy against FR being dumping capacity in DUB, to bury EI (which would be a possibility),
- EI could still benefit from FR's purchasing power, particularly on the long haul (and indeed, it might dissuade FR/MO'L from going down that road?). As things stand, Airbus is wobbling badly and rumours are that the A350 may not even go ahead, so it's probably a fair bet that EI will choose the 787.
Would people be comfortable having FR as a minority shareholder (although FR would still be seeking to increase its shareholding)?
Although the govt said today that it was considering legal action to stop FR, I would see that as posturing, since it appeared as recently as this morning that the govt could fall and this would be a particularly inconvenient issue to come up during an election, so they had to be seen to do something?
Finally, what became of the rumour that "a certain M/E airline" was buying up shares; there's a distinct absence of an Omar Sharif-like figure riding approaching through the desert in the distance ...
Last edited by akerosid; 6th Oct 2006 at 18:26. Reason: Adding link