16th Jan 2009 16:25
16 January 2009
FOR IMMEDIATE RELEASE
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN OR INTO OR FROM AUSTRALIA, CANADA, JAPAN, SOUTH AFRICA OR THE UNITED STATES OF AMERICA OR ANY OTHER JURISDICTION WHERE IT WOULD BE UNLAWFUL TO DO SO
Aer Lingus Group plc
ISE: EIL1 LSE: AERL
Aer Lingus Chairman Challenges Ryanair to Provide Remedy Proposals
Aer Lingus believes that Ryanair Offer is unlikely to be Capable of Completion
Aer Lingus notes Ryanair's announcement today that it will not proceed with a Phase II review of its Offer for Aer Lingus without significant support from Aer Lingus shareholders, including the acceptances of the Irish Government or the ESOT.
Aer Lingus continues to believe that the Offer is diversionary and fatally flawed. Ryanair has not disclosed any new remedies to Aer Lingus shareholders nor provided any new evidence that clearance could be achieved. Ryanair has failed to disclose to Aer Lingus shareholders the nature of any new remedies that it believes will enable it to secure competition approval from the European Commission. We believe this failure is unacceptable in the context of a bid that seeks to overturn a recent prohibition.
The Chairman of Aer Lingus, Colm Barrington, is writing to the Chairman of Ryanair, David Bonderman, requesting that Ryanair provide to all Aer Lingus shareholders the full details of the remedies that Ryanair has discussed with the European Commission or those remedies it believes will enable it to secure Commission approval. Without transparency on this matter, Aer Lingus shareholders may conclude that the Offer is incapable of completion. Aer Lingus expects that Ryanair will respond positively to this invitation if Ryanair truly wishes to demonstrate its offer is capable of completion.
Aer Lingus has a Vibrant Future as an Independent Airline
Since its IPO in 2006, Aer Lingus has grown in a disciplined manner, continuing to develop its operations from Dublin, Cork and Shannon and developing new international bases in Belfast and Gatwick. Aer Lingus has significant opportunities to grow its profitable operations further, underpinned by lower fuel prices, a significant fleet order from Airbus and the development of T2 at Dublin Airport. Aer Lingus has launched 42 new routes since Ryanair's last diversionary Offer and maintained its position as the preferred Irish carrier, with 83% of surveyed Irish consumers preferring to fly Aer Lingus to Ryanair.
At the same time, Aer Lingus has achieved Unit Cost reductions in airport costs, fuel management, employee costs and productivity, maintenance and distribution. Unit Costs excluding fuel have fallen over 12% since 2005 (from €cents 4.38 to €cents 3.83) enabling Aer Lingus to report an expected Profit in 2008. Aer Lingus believes further Unit Cost reductions will be delivered with the implementation of its recent restructuring, the expansion of its fleet and the development of new international bases. This underpins an expected Profit in 2009. Aer Lingus' profit forecast has been independently reviewed by PricewaterhouseCoopers and their report is set out at Appendix VI of the circular to shareholders published on 22 December 2008, as required by the Takeover Rules.
Aer Lingus' shareholders should not be distracted by Ryanair's claim that European airline consolidation is inevitable. In the past five years the only consolidations of any comparable size that have taken place have involved failing airlines such as Alitalia, Austrian Airlines and Swiss. Aer Lingus clearly does not fall into this category. Aer Lingus has unmatched financial strength, with one of the highest Net Cash balances and the best liquidity of all major European airlines. Even Ryanair's own advisers believe that Aer Lingus is one of the best placed of all European airlines, having been quoted as saying that "the chances of Aer Lingus going bust are zero".
The Ryanair Offer is not capable of completion without remedies
Aer Lingus believes that Ryanair has attempted to divert Aer Lingus shareholders' attention away from the central issues of the Offer. In particular, Aer Lingus believes that Ryanair has not faced up to the realities in relation to its ability to achieve approval from the European Commission for a merger of Aer Lingus and Ryanair.
In June 2007 the European Commission prohibited the merger of Aer Lingus and Ryanair, as the combination would have created a monopoly or dominant position on 35 routes. The Commission did not accept that Ryanair's remedy proposals would allow for competition to be achieved. Today, a combination of Aer Lingus and Ryanair would be even more dominant with the number of monopoly and overlapping routes increasing since June 2007. Moreover, according to a recent survey the Irish consumer remains unconvinced, with less than a quarter supporting a Ryanair acquisition of Aer Lingus.
Ryanair is still seeking to overturn the 2007 European Commission prohibition by an appeal. We note Ryanair's comments today in relation to not wanting to waste the time of the Irish Government or the European Commission in another Phase II investigation without significant shareholder support. Given this, and to avoid another significant waste of shareholder funds, Ryanair should withdraw their appeal of the 2007 prohibition.
Aer Lingus believe that the Ryanair Offer is unlikely to be capable of completion. Despite this, Ryanair has limited itself to repeating to Aer Lingus shareholders part of the remedies package which the European Commission rejected as insufficient last time. Ryanair has failed to disclose to Aer Lingus shareholders the complete remedies it will offer this time that will enable it to secure competition approval from the Commission. Aer Lingus believes that this is because Ryanair does not have remedy proposals that are capable of delivering this Offer.
Clarifications
On 30 December 2008, Aer Lingus spokesman Enda Corneille was quoted as saying "Paying out over 25k of his own shareholder's funds to reprint a letter that is out of date shows how desperate Michael O'Leary is to avoid facing up to the fundamental issue, which is that his bid drastically undervalues Aer Lingus and is not capable of completion". Aer Lingus continues to believe that Ryanair is wasting the funds of both Ryanair and Aer Lingus shareholders and that Ryanair is avoiding the fundamental issues of the Offer. Aer Lingus would like to clarify that the comment "not capable of completion" is an expression of opinion by Mr Corneille and should have been qualified by reference to the Ryanair Offer being unlikely to be capable of completion, as referred to above.
On 18 December 2008, Aer Lingus Chairman Colm Barrington made a statement to the Oireachtas Transport Committee that "Aer Lingus has made over €200m profits since the IPO". Aer Lingus has reported a cumulative total of €209m of Profit since 2006 with Profit for 2006 being based on an underlying measure of profitability as detailed in the Aer Lingus Annual Report 2006, and 2007 Profit and H1 2008 Profit being based on Aer Lingus Annual Report 2007 and Aer Lingus Interim Report 2008.
Certain terms used in this announcement, including certain technical and other terms and their sources and bases, are defined and explained in the Circular to Shareholders published on 22 December 2008 (the "Defence Document"). References to 83% of surveyed Irish consumers preferring to fly Aer Lingus to Ryanair are sourced from a TNS MRBI poll conducted in December 2008. References to further Unit Cost reductions to be delivered with the implementation of its recent restructuring, the expansion of its fleet and the development of new international bases are sourced from page 19 of the Defence Document. References to Aer Lingus having achieved Unit Cost reductions in airport costs, fuel management, employee costs and productivity, maintenance and distribution are sourced from pages 16 and 17 of the Defence Document. References to Unit Costs excluding fuel having fallen over 12% since 2005 (from €cents 4.38 to €cents 3.83) are sourced from page 19 of the Defence Document. References to unmatched financial strength are sourced from pages 13, 14 and 15 of the Defence Document. References to airline consolidations of comparable size refers to transactions involving airlines of greater than 10bn ASKs since 2004 and are sourced from SDC and BackAviation. References to Ryanair's advisers believing that Aer Lingus is one of the best placed of all European airlines are sourced from page 13 of the Defence Document. References to a Ryanair monopoly or dominant position on 35 routes are sourced from page 21 of the Defence Document. References to the Commission not accepting that Ryanair's remedy proposals would allow for competition to be achieved are sourced from page 21 of the Defence Document. References to a combination of Aer Lingus and Ryanair would be even more dominant with the number of monopoly and overlapping routes increasing since June 2007 are sourced from page 22 of the Defence Document. References to less than a quarter of Irish consumers supporting a Ryanair acquisition of Aer Lingus are sourced from a TNS MRBI poll conducted in December 2008. References to Ryanair having limited itself to repeating part of the remedies package, which the European Commission rejected as insufficient last time are sourced from page 23 of the Defence Document.
Enquiries:
Aer Lingus Group plc Tel: +353 1 886 2000
Enda Corneille
Goldman Sachs International Tel: +44 207 774 1000
Basil Geoghegan
Michael Casey
Goodbody Corporate Finance Tel: +353 1 667 0400
Finbarr Griffin
David Kearney
Drury Communications Tel: +353 1 260 5000
Billy Murphy
Orla Benson
Powerscourt Tel: +44 207 324 0493
Rory Godson
Victoria Palmer-Moore
Certain statements contained in this document constitute ''forward-looking statements''. In some cases, these forward-looking statements can be identified by the use of forward looking terminology, including the terms ''believes'', ''estimates'', ''forecasts'', ''plans'', ''prepares'', ''anticipates'', ''expects'', ''intends'', ''may'', ''will'' or ''should'' or, in each case, their negative or other variations or comparable terminology. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of Aer Lingus or the industry in which it operates, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. In particular, certain statements in this document relating to future financial results, plans and expectations regarding Aer Lingus' business, growth and profitability, as well as the general economic conditions to which Aer Lingus is exposed, are forward-looking in nature and may be affected by factors referred to in this document. It is strongly recommended that investors read all of this document for a more complete discussion of the factors which could affect the Group's future performance and the industry in which it operates. In light of these risks, uncertainties and assumptions, the forward-looking events described in this document may not occur. Due to such uncertainties and risks, you should not place undue reliance on such forward-looking statements, which speak only as at the date of this document. The Company will not undertake any obligation to release publicly any revisions or updates to these forward looking statements to reflect events, circumstances, unanticipated events, new information or otherwise occurring after the date of this document except as required by law or by any appropriate regulatory authority.
The directors of Aer Lingus Group plc accept responsibility for the information contained in this announcement. To the best of the knowledge and belief of the directors of Aer Lingus Group plc (who have taken all reasonable care to ensure that such is the case) the information contained in this announcement is in accordance with the facts and does not omit anything likely to affect the import of such information.
Goldman Sachs International, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Aer Lingus Group plc and no one else in connection with the Offer by Coinside Limited, a wholly-owned subsidiary of Ryanair Holdings plc (the "Offer") and will not be responsible to anyone other than Aer Lingus Group plc for providing the protections afforded to customers of Goldman Sachs International or for providing advice in relation to the Offer or the contents of this announcement.
Goodbody Corporate Finance, which is regulated in Ireland by the Financial Regulator, is acting exclusively for Aer Lingus Group plc and no one else in connection with the Offer and will not be responsible to anyone other than Aer Lingus Group plc for providing the protections afforded to customers of Goodbody Corporate Finance or for providing advice in relation to the Offer or the contents of this announcement.
Any person who is a holder of one per cent. or more of any class of shares in Aer Lingus Group plc or Ryanair Holdings plc may be required to make disclosures pursuant to Rule 8.3 of the Irish Takeover Panel Act, 1997, Takeover Rules 2007 and 2008, as applied with amendments by the European Communities (Takeover Bids (Directive 2004/25/EC)) Regulations 2006.
Related Shares:
RYA.L