Ryanair Ratchet up Pressure to sell Aer Lingus

Ryanair are ratcheting up the pressure on Ministers to sell Aer Lingus to them. They issued an ISE announcement earlier today outlining the details of their meeting with Noel Dempsey today. It includes a commitment to recognise unions at the airline and give the government control of the slots at Heathrow.

I have the full release below the fold. It is worth reading in its entirity to gauge what Ryanair are playing at here. They reckon they can get a deal – especially in an environment where BA and Qantas are looking at merging into a global airline – and are doing everything to ratchet pressure; provide premium on the shares, make the right noises on unions and slots, appear conciliatory.

Since Ryanair’s announcement of its Offer, it has noted a range of observations and comments from a variety of interested parties and stakeholders. Opinions have also been expressed that Ryanair’s Offer is unlikely to receive European Commission merger approval.

At a meeting between Ryanair and the Minister for Transport last night, 3 December, 2008, Ryanair highlighted the benefits which the Offer, if successful, would deliver to Ireland, Irish consumers, Aer Lingus employees and all other Aer Lingus stakeholders.

In this announcement Ryanair outlines some of the details of its proposals in order to demonstrate how the Offer promotes and secures competition and how it will promote national aviation policy and perceived Irish Government concerns in that regard.

With respect to the Offer, Ryanair is undertaking that, if its Offer is successful, it will:

A) Recognise the Trade Unions in Aer Lingus. Ryanair will commit and guarantee that Aer Lingus will continue to honour and respect Aer Lingus’ long-standing policy of trade union recognition within Aer Lingus.

B) Shannon-Heathrow connectivity will be restored. Ryanair will ensure that Aer Lingus returns to the Shannon-Heathrow route with a minimum daily frequency of a morning and evening rotation, at the first seasonal schedule change following completion of the Offer. The Heathrow slots necessary to meet this commitment will be switched from one of Aer Lingus’ other Heathrow routes. This will meet the Government’s national aviation objective of restoring connectivity between Heathrow and the Shannon/Midwest region, and improving Ireland’s connectivity to London Heathrow.

C) Government will be given control over London Heathrow slots. Ryanair propose that the Articles of Association of Aer Lingus will be amended upon completion of the Offer to provide the Irish Government and Minister for Transport with a legally binding guarantee that will ensure Aer Lingus’ Heathrow slots cannot be sold, transferred, leased or switched by Aer Lingus to any other airline or to any other route without the prior written approval of the Irish Minister for Transport. This legally binding guarantee will protect Ireland’s connectivity to Heathrow and the world.

This will ensure that the Irish Government’s national aviation policy (as articulated at the time of the Aer Lingus’ IPO), to ensure a minimum level of connectivity between London Heathrow and Dublin, Cork and Shannon, will be guaranteed into the future. This proposed provision in the Aer Lingus articles of association (which will be detailed in the Offer Document) will correct the deficiencies in Aer Lingus’ existing Articles, which allowed Aer Lingus to close the Shannon-Heathrow route and replace it with a Belfast-Heathrow route, despite the Government’s objection. This guarantee’ will ensure that Heathrow’s connectivity to Dublin, Cork and Shannon can be protected by the current and future Irish Ministers for Transport for the benefit of Ireland and all Irish consumers/visitors.

D) Ryanair will provide a €100 million bank guarantee that Aer Lingus’ short haul fares will be reduced by a minimum of 5% for a three year period. Ryanair’s Offer guarantee’s to reduce Aer Lingus’ short haul fares (€94 in 2007) by a minimum of 5%, on a like for like basis, for a three year period post completion. The merged Ryanair/Aer Lingus Group will provide the Irish Government with a €100 million bank guarantee which can be drawn down by the Irish Government on behalf of consumer/taxpayers if an independent auditor, nominated by the Government, cannot confirm that the Ryanair/Aer Lingus Group have complied with this fare reduction guarantee each year for the 3 years post completion of the Offer. The Ryanair/Aer Lingus Group will also reimburse the Government for all costs associated with this annual independent audit of Aer Lingus’ short haul fare reduction. This €100 million bank guarantee will provide consumers, the Irish Government and all other stakeholders with absolute assurance that the annual €40 million consumer savings arising from the minimum 5% reduction in Aer Lingus’ average short haul fare will be delivered, in order to promote competition and growth on Aer Lingus’ short haul route network.

E) Ryanair will provide an additional €100 million bank guarantee that Aer Lingus’ fuel surcharges will be eliminated in their entirety (for all new bookings) within 28 days of completion of the Offer. The merged Ryanair/Aer Lingus Group will provide the Irish Government with a €100 million bank guarantee which can be drawn down by the Irish Government on behalf of consumers/taxpayers if an independent auditor nominated by the Government cannot confirm that the Ryanair/Aer Lingus Group have complied with this fuel surcharge elimination within 28 days of completion of the Ryanair Offer (for all new bookings). The Ryanair/Aer Lingus Group will also reimburse the Government for all costs associated with this independent audit of Aer Lingus’ fuel surcharge elimination. This €100 million bank guarantee will provide consumers, the Irish Government and all other stakeholders with absolute assurance that the annual €100 million consumer saving arising from the elimination of Aer Lingus’ fuel surcharges will be delivered in order to promote competition and growth on the Aer Lingus’ long haul route network.

Ryanair believes that these substantial guarantees and financial penalties, which will be unique to the proposed Ryanair-Aer Lingus airline merger, will afford consumers, the Irish Government, the European Commission and all other stakeholders the necessary confidence in Ryanair’s guarantees. Ryanair believes that these reductions in Aer Lingus’ short haul fares and removal of Aer Lingus’ fuel surcharges will deliver annual consumer savings of over €140 million, and will meet national aviation policy by promoting and securing the competitiveness of Aer Lingus’ short and long haul network, and increasing competition between Aer Lingus’ lower fares and Ryanair’s services on short haul routes to and from Ireland.