Aer Lingus Losses Revive Ryanair Merger Talks
Friday, September 05, 2008: Ryanair has announced that its earlier plans to create a single Irish airline group looked justified after rival Aer Lingus reported that it would continue to record losses well into 2009. <br>
Ryanair, whose bid for Aer Lingus was blocked in 2007 by the European Commission on competition grounds, has said that in light of the current wave of European airline mergers it should be allowed to buy the former state carrier.
"These half year results from Aer Lingus conclusively supports Ryanair´s belief that its 2006 takeover strategy for Aer Lingus was the right one," said Ryanair spokesman Stephen McNamara.
Ryanair had promised to reduce Aer Lingus´s fares, scrap its fuel surcharges and reduce its costs, he added.
Aer Lingus posted a half-year loss last Thursday mainly due to record high fuel prices and slower markets, adding that it needed a major cost-cutting drive to remain viable.
Aer Lingus, CEO Dermot Mannion denied, however, that the airline had become more vulnerable to a takeover, arguing that it was still in a better position than most European short-haul carriers.
Many analysts agree with this argument highlighting that the airline has one of the strongest balance sheets in the industry with more than EUR800 million euros in cash.
Ryanair, which holds more than 29 percent of Aer Lingus shares and nearly three times more cash than its rival, said Aer Lingus´ "independence strategy" had failed.
Ryanair, Europe´s biggest low-cost carrier, has said it could also make a small loss this year for the first time since 1989 as it cuts fares to grab business from struggling rivals.
"Approximately 25 carriers have failed this year, as fuel costs rose to record highs," said John Goode, analyst at Goodbody Stockbrokers in Dublin.
"As we leave the summer period behind, and the seasonally high cash flows for airlines that come with it, this list is likely to be extended."
Last week alone, Canadian low-cost carrier Zoom Airlines cancelled all flights and began bankruptcy proceedings, while Italian national airline Alitalia also sought bankruptcy protection.