Ryanair Said Willing for Aer Lingus Cuts for EU Approval

Ryanair Holdings Plc (RYA) offered to surrender half of Aer Lingus Group Plc (AERL)’s short-haul business as it seeks European Union approval to buy its Irish rival, according to two people familiar with the negotiations.

Ryanair submitted its latest concessions to the European Commission last week and they were sent to competitors and customers for comments on Jan. 21, said the people, who asked not to be identified because the talks are private. Some 43 routes would go to Flybe Group Plc (FLYB), with International Consolidated Airlines Group Plc (IAG)’s British Airways taking three using London’s Heathrow airport, the people said.

Flybe is in discussions with Ryanair “about the possible transfer of a number of aircraft and operating routes as part of the package of concessions Ryanair has submitted to the European Commission,” the Exeter, England-based airline said today.

Ryanair, Europe’s biggest discount airline, owns about 30 percent of Aer Lingus and in June renewed an attempt to buy the rest. The EU blocked a takeover effort five years earlier, saying it would create a monopoly for Irish flights. Ryanair’s plan has also drawn opposition from Aer Lingus and Ireland’s government.

“It does appear Ryanair are very keen to get Aer Lingus and are willing to make whatever concessions necessary to make the deal happen,” said Mark Murnane, head of trading at Dublin- based spread-betting provider Marketspreads Ltd. “The big sticking block is that the government has already said no to selling its stock.”

Ryanair Chief

Ryanair Chief Executive Officer Michael O’Leary said yesterday that the company was “trying to tweak” earlier proposals to address regulators’ competition concerns over the 694 million-euro ($924 million) bid for Dublin-based Aer Lingus. He expects a positive decision from the EU by the end of next month, he said in an interview in Rome.

Ryanair has said it could exit all 46 Dublin routes that overlap with Aer Lingus and that several rival carriers are interested in competing at Irish airports. IAG signed a non- binding agreement in December to buy landing slots at Heathrow airport from Ryanair if it completes the planned takeover.

Stephen McNamara, a spokesman for Ryanair, declined to comment on precise concessions offered. IAG spokeswoman Laura Goodes declined to comment when contacted by Bloomberg News yesterday. Aer Lingus spokesman Declan Kearney declined to comment.

‘Justifiable’ Opportunities

A reorganization of Flybe announced today “doesn’t preclude us from taking on opportunities as long as they are well-financed and are justifiable in terms of being supportive and additive to the business,” Flybe Chief Executive Officer Jim French said today in a conference call. He spoke before the company confirmed it’s in talks with Ryanair about the routes.

British Airways paid Flybe about 130 million pounds ($206 million) when the long-haul carrier gave up its regional routes in 2006, French said. The payment ensured that Flybe could “complete the restructuring adequately and properly,” he said.

“Clearly, if somebody knocks on our front door and has an offer or a deal that is of similar appeal to that, then we’d be very interested,” he said.

The commission said today it extended until March 6 its deadline to rule on the Ryanair proposal for Aer Lingus, without specifying a reason. Antoine Colombani, a spokesman for the commission, declined to comment.

Government Concerns

The Irish government, which owns 25 percent of Aer Lingus, said last month that Ryanair’s remedies offered until then didn’t satisfy its concerns and that it wouldn’t support any offer that would significantly undermine flight connections from the country.

EU officials asked Ryanair earlier this month to come up with further concessions after they identified shortcomings in remedies proposed by the carrier in December, two people said previously. The company’s initial offer last year also failed to convince regulators, two people said in November.

The EU said in August that the takeover could eliminate competition on a large number of routes and few new competitors are likely. The Brussels-based authority blocked Ryanair’s bid for Aer Lingus in 2007, saying a takeover would allow the discount airline to dominate 35 routes and control 80 percent of the market in Dublin, where Ryanair also has its headquarters.

Flybe will eliminate about 300 jobs and reduce its divisions to two in an effort to restore profit, it said today. The carrier is targeting a return to profit in fiscal year 2014.

To contact the reporters on this story: Joe Brennan in Dublin at jbrennan29@bloomberg.net; Aoife White in Brussels at awhite62@bloomberg.net.

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net.

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