AVIATION

Ireland grounds Ryanair's bid for Aer Lingus

The Irish government has rejected a billion-dollar bid by budget carrier Ryanair for rival Aer Lingus, arguing it "undervalued" the national carrier and would have created a monopoly in the market.

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AFP - Budget airline Ryanair admitted defeat Thursday in its efforts to take over rival Aer Lingus after the Irish government, which owns a 25 percent stake in the carrier, rejected its one-billion-dollar bid.

Transport Minister Noel Dempsey said Ryanair's offer "greatly undervalues" Aer Lingus, adding the deal would have created a monopoly which was bad for Irish consumers.

But the decision was attacked as "strange" and "sad" by Ryanair chief executive Michael O'Leary, although he said the firm would "respect and abide by" the government's decision.

Aer Lingus management urged shareholders not to back the takeover when it was launched before Christmas.

Ryanair's bid was worth only half the 1.48 billion euros the low-budget carrier had offered for Aer Lingus in an unsuccessful takeover attempt in October 2006.

"It is strange, when the Irish government is looking for two billion euros in cost savings (because of the credit crunch), that it would reject an offer of 188 million euros (for its stake)," O'Leary said after the rejection was announced.

"It is also sad, when thousands of jobs are being lost in Ireland, that Ryanair's offer to create 1,000 new Irish jobs in Aer Lingus over the next five years has been rejected."

Dempsey, however, insisted that the government had taken the right decision.

"Government took the view that the Ryanair offer greatly undervalues Aer Lingus," he said in a statement.

"Competition was a major consideration. The cornerstone of Irish aviation policy is and has been for many years, to encourage competition.

"Because we live on an island, Irish consumers depend very heavily on air transport. A monopoly in this area would not be in the best interests of Irish consumers."

Ryanair's failed 2006 offer was also strongly opposed by major Aer Lingus shareholders, including the Irish government, company employees, pilots and their pension fund.

It was ultimately blocked by EU anti-competition regulators.

Earlier Thursday, Aer Lingus said it was forging closer links with United Airlines over a number of routes between Europe and the United States that may develop into a broader and deeper joint venture.

"We are very excited by the potential of the partnership and believe that the unique combination of two leading transatlantic airlines can drive significant value for the shareholders of both companies," said Aer Lingus chief executive Dermot Mannion.

But O'Leary was dismissive of this announcement, saying Aer Lingus faced an "isolated" future "as a small, peripheral, loss-making airline".

 

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