Response to Ryanair Open Letter

Aer Lingus Group plc

ISE: EIL1 LSE: AERL

Response to Ryanair Open Letter

Dublin & London, 22 September 2011:  Aer Lingus Group plc ("Aer Lingus") Chairman, Colm Barrington, today responded to the open letter from Ryanair dated 13 September 2011. The letter of response is attached to this announcement.

Ends

For further information please visit www.aerlingus.com or contact:

Mr Michael O'Leary

Chief Executive

Ryanair Limited

Corporate Head Office

Dublin Airport

Co Dublin

22 September 2011

Dear Michael,

I have your letter of September 13th. Your letter includes several significant misrepresentations about Aer Lingus, which I must correct.

Shareholder Communications:

I totally reject your assertion that Ryanair and other shareholders are "continually ignored" by the Aer Lingus Board and Management. We agreed to have a discussion of the dividend issue at our AGM in May, we have a comprehensive programme of meetings with major shareholders (and have met Ryanair in that context) following publication of our half year results and we will be hosting an investor day at the end of this month (to which Ryanair has been invited). All shareholders are welcome to express their views at these and other forums, and their reasonable opinions are considered following them.

In fact, one of the greatest concerns that we hear from shareholders relates to Ryanair's shareholding in the Company and its impact on the Company's options and value. As such we welcome your recent statements that Ryanair would be prepared to dispose of its shareholding in Aer Lingus and we would hope to have constructive conversations with you on this issue.

In March 2011, we made it clear to you that Ryanair had no right to force Aer Lingus to accede to demands regarding the payment of a dividend and the imposition of various requirements for prior shareholder approval. As you know, the High Court has since confirmed that Aer Lingus was correct in rejecting the two resolutions which you sought to table at the Aer Lingus AGM. Disagreeing with the demands of a shareholder (and our largest competitor) whose record includes a series of attempts to devalue Aer Lingus for its own ends is quite different from ignoring shareholders who want to assist us in creating value for Aer Lingus and all of its shareholders; to which the Board and Management are fully dedicated.

Profit Share Agreement:

Your categorization of the December 2010 transaction in which Aer Lingus bought out the interests of the ESOT under the profit share arrangement as being a "gift" to the ESOT is grossly misleading. The arrangement put in place at the time of the Aer Lingus IPO involved Aer Lingus agreeing to share a portion of its annual profits with the ESOT until the earlier of April 2023 and the full repayment of the ESOT's debt and associated interest. This was clearly disclosed in four places in the IPO prospectus in 2006 and subsequently disclosed in our Annual Reports of 2007, 2008 and 2009. Consequently, details were available to all prospective shareholders at the time of the IPO and to Ryanair at the time you bought your shares in Aer Lingus and was referenced in every Annual Report you will have received since as a shareholder.

In December 2010 the Aer Lingus board, after extensive advice and full consideration, decided that it was in the best interests of the Company and its shareholders to buy out the Company's obligations under this profit share arrangement. We have explained the rationale for the transaction to Ryanair on multiple occasions both in correspondence and in face to face meetings. However, the primary reasons for the December 2010 agreement are again outlined below:

·; The requirement to pay part of our profits to the ESOT through April 2023 would have been a continuing cause of uncertainty and a drain on our profits and on shareholder value;

·; The annual interest rate on the ESOT loan, payable by Aer Lingus, was approaching 10%. This was a significant multiple of what the Company earns on its free cash and so use of a small part of that free cash to extinguish that obligation made sound financial sense;

·; As part of the December 2010 agreement, the shares representing approximately 12.5% of the Company's total issued shares held as a block by the ESOT were distributed to the individual members of the ESOT. This has increased the Company's free float from approximately 30% to approximately 42% of our total issued shares; and

·; The ESOT is no longer entitled to nominate directors to the board of Aer Lingus.

The decision to buy out Aer Lingus' obligations under the 2006 profit sharing arrangement makes financial sense and is thus in the best interests of our shareholders. In addition, on foot of a complaint from Ryanair, this matter was looked at by the Office of the Director of Corporate Enforcement (ODCE). As you are aware, the ODCE found that no breach of the Companies Acts had taken place.

Dividends:

The Board considers the payment of dividends on an ongoing basis, and indeed we provided shareholders with an opportunity to express their views on this issue at our AGM last May. At the time of the AGM we stated that "the Board continues to evaluate the respective merits of balance sheet strength and payment of a dividend to shareholders. The Board believes that it is in the best interests of all shareholders to consider a dividend when there is a more durable recovery and consequent earnings visibility". This remains our position.

The Board is always prepared to listen to shareholders' reasonable representations, but at the end of the day must exercise its own judgement as to what is in the best interests of Aer Lingus and all of its stakeholders. In evaluating all capital allocation decisions, the Board's role is to distinguish between what an individual shareholder may want and what creates value. Our objective is to build durable value.

Payment Authorizations:

Regarding your general point about the authorization of expenditures, you are well aware from Ryanair's unsuccessful High Court proceedings against Aer Lingus earlier this year that the Board has the power to determine what (if any) pension benefits the Company will provide and to determine what payments are to be made to a Company pension scheme. However, as regards the pension schemes our position is and has been quite clear: Aer Lingus has met all of its obligations to those schemes.

We are working with the pension trustees and employee groups to attempt to find solutions to the pension issues, but have made it quite clear that Aer Lingus has given assurances about the defined contribution nature of the pension schemes.

Our position regarding payments to the ESOT is also clear as explained above, and the ESOT is no longer a relevant issue.

Settlement with Revenue:

The so called "Leave and Return" programme completed in 2008 was part of the Company's ongoing effort to reduce Aer Lingus' costs and to eliminate legacy practices that existed at the time of the IPO, and when Ryanair purchased its shares. The benefits of this programme, and the other initiatives that we have taken under the Greenfield programme, have been hugely beneficial to Aer Lingus and have been significant factors in the major improvements in our financial results as reported for 2010 and in our recent H1 2011 statement.

The settlement with the Revenue in early 2011 was as a result of the Board's decision, again after extensive advice and full consideration, that the outcome of a claim by the Revenue against the tax categorization of the "Leave and Return" programme could, with interest and penalties, result in a major future cost for Aer Lingus and its shareholders. In addition, uncertainties caused by a dispute between the Company and the Revenue could have had an ongoing drag on shareholder value. As a result, and considering the Revenue's substantial powers, the Board concluded that it was in the best interests of the Company and its shareholders to enter into a settlement with the Revenue.

As disclosed, the Board subsequently commissioned an internal review on the execution of the programme for its own use. As stated in our recent half year results announcement, the Board has received the findings of this review, has considered its recommendations and has acted on them. It would be in contravention of our own Board policies and our legal advice to release the findings of the review to any third party.

In my view Ryanair's second frivolous and unsuccessful bid for Aer Lingus in late 2008 and early 2009 had a much greater cost to Aer Lingus and its shareholders than the Revenue settlement. I would remind you that, excluding your own acceptances, only 0.1% of Aer Lingus shareholders accepted your offer made in December 2008. As you are aware, the issues around Ryanair's shareholding in Aer Lingus are currently being investigated by the UK Office of Fair Trading. We await the outcome of that investigation with interest.

Sincerely,

Colm Barrington

Chairman