February 5, 2013 9:43 am

Further Aer Lingus concessions for Ryanair

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Ryanair has offered €100m to Flybe, the regional airline, to operate many of Aer Lingus’ routes out of Ireland, in its latest effort to persuade the European Commission to approve its contentious takeover of the Irish flag carrier.

Ryanair had also made a conditional offer to International Airlines Group, parent of British Airways, to provide the UK flag carrier with a majority of Aer Lingus’ valuable take-off and landing slots at London’s Heathrow airport, said two people familiar with the matter.

But Ryanair’s attempt to take over Aer Lingus is far from certain of securing regulatory approval. Brussels blocked Ryanair’s first bid in 2007, and since the latest offer was unveiled in June the Commission has expressed fresh concerns about the potentially negative impact on competition.

Flybe on Tuesday confirmed Ryanair, Europe’s largest budget carrier by revenue, had agreed in principle to contribute €100m in cash and about 10 aircraft to a new subsidiary of the regional airline, should the takeover of Aer Lingus gain regulatory clearance.

The subsidiary would operate about 40 per cent of Aer Lingus’ short-haul routes for three years in an effort to ensure competition on flights in and out of Ireland.

The deal would provide a substantial boost for Flybe, which reported a pre-tax loss of £6.2m in 2011-12 and has issued several profit warnings since its 2010 flotation.

Flybe said implementation of its agreement with Ryanair would be dependent, among other things, on the “outcome of the Commission’s deliberations on the competition aspects of Ryanair’s bid”.

Ryanair has progressively improved a package of remedies to address the Commission’s concerns about competition.

Aer Lingus claimed last year that a merger between it and Ryanair would leave the combined company with a monopoly or dominant position on 44 routes out of Ireland.

To address these concerns under Ryanair’s latest remedies package, Flybe would operate about 40 of Aer Lingus’ 100 short-haul routes.

Separately, British Airways would operate services between London’s Gatwick airport and Dublin, Shannon and Cork for up to three years, said two people close to the situation.

Ryanair has agreed to provide British Airways with an estimated 68 per cent of Aer Lingus’ Heathrow slots if it can secure approval from the Irish flag carrier’s shareholders.

Aer Lingus’ articles of association suggest shareholders holding 30 per cent of its stock could block a transfer of the Heathrow slots.

If Ryanair was unable to provide the Heathrow slots to British Airways, it would pay a penalty to IAG.

Ryanair, IAG and the Commission declined to comment.

Ryanair’s shares were down 1 per cent at €5.55. IAG’s shares were up 2 per cent at 215.10p, and Flybe’s slid 2 per cent to 44.7p.

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