IAG signs non-binding MOU with Ryanair for some 19 Heathrow slot pairs belonging to Aer Lingus
Ryanair, which owns 29.8% percent of Aer Lingus, in June renewed its effort to buy the rest of Aer Lingus, to boost its Irish operations. The EU blocked a previous takeover attempt 5 years ago, saying it would create a monopoly for Irish flights. Now IAG has signed a non-binding agreement to buy landing slots at Heathrow airport from Ryanair as part of its takeover bid for Aer Lingus. This is subject to EC approval, and Ryanair hopes the sale of the slots will help its bid to buy Aer Lingus. Ryanair proposed selling more than 85 % of Aer Lingus’s Heathrow slots and the FT says Ryanair has reached agreement with BA. Aer Lingus already has 23 daily slot pairs at Heathrow, which amounts to 3.5% of the total. It currently flies to Heathrow from Dublin, Cork, Shannon and Belfast. It recently tried – but failed – to get some of the 14 pairs of slots that had been owned by BMI. Let’s see if BA uses its new slots for flights to the emerging markets – or just more lucrative tourist routes.
IAG Signs Non-Binding Accord With Ryanair for Heathrow
International Consolidated Airlines Group SA (IAG), owner of British Airways, signed a non-binding agreement to buy landing slots at London’s Heathrow airport from Ryanair Holdings Plc’s (RYA) as part of the discount airline’s takeover bid for Aer Lingus (AERL) Group Plc.
“We have signed a non-binding MOU with Ryanair, which is subject to EC approval, as part of its review of Ryanair’s proposed takeover of Aer Lingus, and IAG board approval,” IAG said in an e-mailed statement today.
Ryanair proposed selling more than 85 percent of Aer Lingus’s Heathrow slots and it has reached agreement with British Airways, the Financial Times reported, citing three people familiar with matter.
Ryanair offered new concessions to European Union antitrust regulators reviewing its 694 million-euro ($914 million) bid for Aer Lingus. The EU’s antitrust authority in Brussels extended until Feb. 27 its deadline to rule on the deal, according to a filing. It didn’t give details of Ryanair’s proposals. The carrier’s previous offer to allay possible antitrust concerns failed to convince regulators, who didn’t send it to rival airlines for their comments, according to two people familiar with the matter.
Ryanair, which owns 29.8 percent of Aer Lingus, in June renewed its effort to buy the rest of the smaller competitor to bolster its Irish operations. The EU blocked a previous takeover attempt five years ago, saying it would create a monopoly for Irish flights. The bid has also drawn opposition from Aer Lingus management and Irish politicians.
A spokesman for Ryanair wasn’t immediately able to comment.
http://www.bloomberg.com/news/2012-12-15/iag-signs-non-binding-accord-with-ryanair-for-heathrow.html
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Financial Times:
December 14, 2012
BA in Ryanair deal for Heathrow slots
By Andrew Parker in London and Alex Barker in Brussels
British Airways stands to strengthen its grip on Heathrow by gaining the right to buy a large chunk of take-off and landing slots at the airport, as part of proposals Ryanairis offering European regulators to seek approval for its contentious takeover of Aer Lingus.
The UK flag carrier, the largest airline at Heathrow, has struck a deal with Ryanair to purchase more than 85% of Aer Lingus’s slots at the airport, which are currently used to provide services to Dublin, Shannon and Cork.
FT story at http://www.ft.com/cms/s/0/28317d80-4601-11e2-b780-00144feabdc0.htm
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Earlier:
Ryanair hits trouble with Aer Lingus bid, profits boom
By Lorraine Turner and Foo Yun Chee
DUBLIN/BRUSSELS
Nov 6, 2012 (Reuters)
Ryanair raised its full-year profit forecast on Monday after a bumper first six months but it faced an uphill task to push its takeover of Aer Lingus past EU regulators.
Europe’s biggest budget airline beat expectations for the first half of the year thanks to higher fares, lower than expected fuel costs and a surge in demand after the London Olympics, pushing its shares almost six percent higher.
It said on Monday that it had “at least two up-front buyer(s)” for routes that could be sold to ease competition fears over its 700 million euro Aer Lingus offer.
That was, however, unlikely to be enough to win over EU antitrust regulators. A person familiar with the matter told Reuters that Ryanair had not offered sufficient concessions and that “a statement of objections is likely.”
The person said the objections were likely to be sent to Ryanair in the coming week or two.
Under standard EU procedures it will still have the opportunity to make more concessions and push through the deal, but the process is now well advanced and it may have to give substantial ground to do so.
The Ireland-based airline, which believes consolidation in the EU market favours this, its third bid for its local rival, also said on Monday it was benefiting from the demise of European rivals such as Spanair and Hungarian firm Malev.
Many airlines have been hit hard by Europe’s struggling economy and high fuel costs. Ryanair has fared better than most, thanks to its size and focus on low costs and low prices.
“It was a strong performance after the Olympic Games, we certainly saw an upward rise in average fares. Many people who appeared to stay at home … came back in force post the Olympic Games,” Chief Financial Officer Howard Millar told Reuters.
Ryanair said its fares rose 6 percent in the six months ended September, while passenger numbers surged 7 percent.
As a result, it lifted its profit forecast for the year ending March 2013 to 490-520 million euros from its previous guidance of 400-440 million euros.
Ryanair closed up 5.8 percent at 4.81 euros.
Shares in European airlines Air France-KLM (AIRF.PA) and Lufthansa (LHAG.DE) both rose towards the end of last week after posting reassuring results on Thursday.
FUEL SAVINGS
Ryanair said its first-half net profit rose to 596 million euros from 544 million a year ago and above analyst expectations at 564 million. Revenue jumped 15 percent to 3.1 billion euros.
Ryanair makes most of its money from leisure travellers and normally records a loss in its seasonally quieter second half.
The airline, with an average fare of 53 euros, said it was cautious on winter trading due to low visibility on fourth-quarter bookings, but expected the positive trends to continue, with good forward bookings into the third quarter.
“We expect fares will rise for the full-year by about 4 percent … about 1 percent higher than we expected, and our fuel bill will be down a bit more than we had previously guided,” said Millar.
Chief Executive Michael O’Leary told Reuters Digital Video that Spanish and Italian taxes had contributed to higher fares.
Ryanair’s fuel bill was lower than expected due to a fuel saving programme which manages the way pilots fly aircraft and where they buy fuel, said Millar. The airline now expects its fuel bill to rise 260 million euros this financial year, 40 million euros less than previously assumed, he added.
Oil prices will fall however over the medium-term, said O’Leary, who called on oil futures to be investigated for market manipulation in the wake of the rigging of the benchmark interest rate Libor.
“I still do not understand why, for example, oil futures are so high … we are still waiting for some regulator to investigate them,” said O’Leary.
Ryanair, which carried 48 million passengers in the first half, said it was on target to grow its full-year traffic by 4 percent. Over the next decade, it aims to grab an 18 percent share of the European short-haul air travel market from its current 12 percent.
http://www.reuters.com/article/2012/11/06/uk-ryanair-idUSLNE8A401420121106
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The Irish Times
November 17, 2012
Aer Lingus second in race for Heathrow slots
Aer Lingus looks set to lose out in the race to acquire daily slots from London Heathrow to Edinburgh that are being offered as a condition of the takeover of UK carrier BMI by International Airlines Group (IAG), which is led by Irishman Willie Walsh.
Aer Lingus was told by the European Commission yesterday that it has been ranked second in its application for the six daily slot pairs offered on the Heathrow to Edinburgh route. It is not clear who was ranked first but Virgin Atlantic is believed to have pitched strongly for the routes.
“We are awaiting receipt of a copy of the European Commission’s decision setting out the basis of this ranking,” Aer Lingus said in a statement released to The Irish Times yesterday. “The process is still ongoing, and we will consider the European Commission’s decision in detail upon receipt.”
Aer Lingus already has 23 daily slot pairs at Heathrow. It currently flies to Heathrow from Dublin, Cork, Shannon and Belfast.
In March the European Commission cleared IAG’s takeover of BMI on condition that it would release 14 daily slot pairs at Heathrow to other airlines.
http://www.irishtimes.com/newspaper/finance/2012/1117/1224326702316.html
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Ryanair offers Heathrow slots to win support for Aer Lingus bid
Ryanair has approached Virgin Atlantic and other carriers about making Aer Lingus slots at Heathrow available for sale if it succeeds in a takeover bid for its Irish rival.
The budget giant owns just under 30% of Aer Lingus and is in talks with the European Commission on potential competition remedies if a €694 million (£545 million) bid for Aer Lingus is successful.
Aer Lingus has 3.5% of slots at Heathrow, where BA now holds in excess of half the slots since its takeover of BMI.
Virgin Atlantic would love to get hold of the Aer Lingus slots, which would almost double the number it holds – although Ryanair would be unlikely to surrender them all unless it intends to pull Aer Lingus out of Heathrow altogether.
It seems more likely Ryanair is attempting to build support for its bid given the forces ranged against it. Brussels blocked a previous Ryanair bid for Aer Lingus in 2006 and Ryanair withdrew a second bid in 2008 in anticipation it would be blocked.
The Irish government, which owns 25% of Aer Lingus, has opposed previous Ryanair bids and Aer Lingus has declared the current bid “not credible”, arguing the resulting monopoly would be greater than when the EC previously blocked the bid.
Etihad Airways confirmed it would consider purchasing Ryanair’s stake if offered, to add to its 3% share in Aer Lingus. However, the Abu Dhabi-based carrier said there had been no talks with Ryanair.
An Etihad spokesman said: “If approached by Ryanair we would be happy to have a discussion about the stake and evaluate the opportunity.”
Etihad has previously expressed interest in the Irish government’s stake, but could not buy both because of EC restrictions on foreign ownership.
However, it might prefer to work with Dublin as a partner shareholder rather than with Ryanair, which dismissed as “rumour and speculation” reports that it proposes to pull Aer Lingus off a series of Dublin routes if it gains control.
The EC is expected to issue a ruling on the takeover at the end of August.
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Back in July 2012:
Aer Lingus to bid for UK slots at Heathrow
Irish flag carrier, Aer Lingus, is considering an expansion into domestic flights in Britain.
7 Jul 2012
Aer Lingus is considering an expansion into domestic flights in Britain in a clear signal to Ryanair that it is pursuing its own growth strategy and has no intention of submitting to a takeover.
The Irish flag carrier is lining up a bid for some of the 12 Heathrow take-off and landing-slots available after the acquisition of bmi by British Airways in March.
Aer Lingus intends to offer flights between Edinburgh and Heathrow. Applications are due next month.
Virgin Atlantic will also compete for the slots. Virgin will unveil plans today also to offer flights between London and Moscow, if it wins the slots. International Airlines Group, BA’s parent company, agreed with the European Commission to give up 14 slot pairs as a condition of its takeover of bmi.
Two of those slot pairs are leased to Russian carrier Transaero. The EC will take the final decision over which airline gets the extra slots.
It has prescribed that 8 of the 12 slot pairs must be used for flights between Heathrow and Edinburgh or Aberdeen to provide adequate competition to BA.
Michael O’Leary, the chief executive of Ryanair, made a surprise €1.3 (£1) a share offer for Aer Lingus last month, which values the carrier at about €694m (£560m). It has until next Tuesday to submit a full bid.