Etihad CEO Interested in Buying Ryanair’s Aer Lingus Stake

Gulf carrier Etihad Airways said it’s interested in buying Ryanair Holdings Plc (RYA)’s near 30 percent stake in Aer Lingus Group Plc (AERL) as Europe’s biggest discount airline struggles to take over its Irish competitor.

Etihad, which already owns 3 percent of Aer Lingus, would be “very happy to have that discussion,” Chief Executive Officer James Hogan said today by telephone from Brisbane, Australia. “Dublin is a strong, profitable route for us and we’re very keen to strengthen our partnership there.”

The third-largest Middle Eastern carrier has also had talks about buying the Irish state’s 25 percent stake in Aer Lingus as it invests overseas to help bolster traffic through its Abu Dhabi hub. Ryanair’s bid for Aer Lingus has drawn opposition from management and politicians and sparked a review by European Union regulators who blocked a similar takeover bid in 2006.

Dublin-based Ryanair said in its June bid statement that if Etihad or another investor acquired the state’s stake it would be willing to enter into talks about selling its own holding. Ryanair spokesman Stephen McNamara declined to comment today.

Limited Opportunities

Aer Lingus rose as much as 1.4 percent and was trading 0.9 percent higher at 1.08 euros as of 11.50 a.m. in Dublin -- 17 percent below Ryanair’s offer of 1.30 euros. The stock hasn’t closed above 1.09 euros since the bid was announced.

Ryanair rose 1.7 percent and was later priced 0.8 percent higher at 4.11 euros.

Etihad has already invested in Air Berlin Plc, Virgin Australia Holdings Ltd. (VAH) and Air Seychelles Ltd., as well as striking about 36 code-share agreements. Talks on code-sharing with Air France-KLM are under way, Hogan said, though an equity investment isn’t being considered.

The Gulf operator is interested in few other airlines and has ruled out “mega-carriers” and airlines based in North and South America, Hogan said.

“There aren’t many other opportunities,” he said. Non- European investors can’t hold majority stakes in EU carriers because of global aviation agreements.

Etihad signed a code-sharing agreement with Aer Lingus in July, allowing it to sell tickets on the Irish company’s flights linking Dublin with airports including London Heathrow. Irish Transport Minister Leo Varadkar said May 1 after Etihad took its holding that the Gulf carrier’s involvement was a “good thing.”

Ryanair Offer

Ryanair has offered to buy out other Aer Lingus investors in a deal valuing the smaller carrier at 694 million euros ($852 million). Aer Lingus has rejected the proposal, saying the EU will probably veto it on competition grounds.

U.K. regulators are separately investigating Ryanair’s existing Aer Lingus stake and its impact on the travel market. A tribunal rejected attempts to block the investigation on Aug. 8.

Emirates Plans

Hogan said a potential tie-up between Etihad’s neighbor Emirates and Qantas Airways Ltd. (QAN) on Australia-Europe routes would be a boon for the Middle East aviation sector. Dubai-based Emirates, the world’s largest carrier by international passenger traffic, may reach a deal with Qantas within six months, Chairman Sheikh Ahmed bin Saeed al-Maktoum, said Aug. 2.

“It’s great for the Gulf carriers the more people that fly through the Gulf,” Hogan said. Etihad has a similar agreement with Virgin Australia, and said in a statement today it will add new flights to Brisbane from February, taking services between Australia and Abu Dhabi flown by the two to 28 a week.

Etihad has also guarded against an increase in fuel prices by hedging 80 percent of its requirement for the year, Hogan said. Jet fuel prices have risen 23 percent in Singapore trading since hitting a low for the year on June 22.

Ryanair CEO Michael O’Leary’s combined pay jumped 18 percent to 1.3 million euros in the year ended March 31, the company said in its annual report. His salary rose to 800,000 euros from 600,000 euros and the bonus to 500,000 euros from 400,000 euros. There was no pension contribution, compared with 0.1 million euros in the previous year.

To contact the reporter on this story: David Fickling in Sydney at dfickling@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.