Aer Lingus chief - we’re worth more



Aer Lingus (Other OTC: AELGF - news) could be worth more than €850m (£719m) if it remains independent, the airline’s chief has suggested, as European competition authorities prepare to rule on Ryanair’s €694m bid for Ireland’s national carrier.

A decision on whether a takeover of Aer Lingus by Ryanair would be anti-competitive is expected well ahead of a March 6 deadline, after details last week emerged of the low-cost carrier’s final remedy proposals.

Christoph Mueller, chief executive of Aer Lingus, remains hopeful the European Commission will apply “common sense” and block Ryanair’s third attempt to take over its Irish rival.

The aviation veteran believes a plan published last week for Flybe to take over 43 of Aer Lingus’s short-haul flights in return for €150m of cash from Ryanair would not provide “independent competition” within the Irish market.

The EC believes Ryanair would have a monopoly on 46 routes should it be allowed to proceed with its €1.30 a share bid a concern Europe’s biggest low-cost carrier has sought to alleviate by striking a deal with Flybe and British Airways owner, International Airlines Group.

IAG has held discussions with Ryanair over routes between Ireland (OTC BB: IRLD - news) and Gatwick, which could potentially be exchanged for Aer Lingus’s Heathrow slots at a later date.

“The competition which is initiated there is not independent,” Mr Mueller said during a visit to London last week.

Shares in Aer Lingus closed on Friday at €1.40 a share, valuing the company at €742.13m. The shares have gained more than 20pc in the past month.

“In the very unlikely case that they [Ryanair] will be successful, of course the share price [at] which the shares will trade will be so much higher,” Mr Mueller said.

“But even if we stay independent, we are good for a share price, let’s say €1.50/€1.60 on earning potential and we have this huge cash pile which needs to be finally redistributed if we don’t invest that,” he added.

At a share price of €1.60, Aer Lingus would be worth more than €850m.

Analysts said last week that Ryanair’s bid for Aer Lingus, its third since 2006, appeared to be gaining “unexpected traction” after Flybe published proposals to buy a company from Ryanair with up to 12 planes and rights to fly 43 of Aer Lingus’s routes for €1m.

The new company, Flybe Ireland, would be capitalised with €150m cash, €50m of which would come from forward sales, and Ryanair would commit to ensure the company made €20m of pre-tax profits in its first year.

Mr Mueller last week slammed the plan as “desperate” on the part of loss-making Flybe . But Jim French, the UK regional carrier’s boss, has insisted

it would be able to offer a viable competitor to Ryanair in the Irish aviation market by offering better frequencies on key routes and offering a “different product mix”.

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