Ryanair Holdings Plc plans to pay Flybe Group Plc 100 million euros ($136 million) to take over some of Aer Lingus Group’s short-haul business as the low-fare carrier seeks regulatory approval to buy its Irish rival.
Flybe “has reached an agreement in principle with Ryanair about the possible transfer of a number of aircraft and operating routes as part of a package of concessions Ryanair has submitted to the European Commission,” the Devon, England-based airline said today in a statement. The accord still requires board and shareholder approval, Flybe said.
The U.K. carrier would acquire 43 routes from Dublin-based Aer Lingus, almost half of its short-haul network, and more than 10 aircraft and associated crew under a binding agreement filed with the European Commission, according to two people familiar with the deal. Ryanair would forgo about 20 million euros of Aer Lingus’s pretax earnings as a result, said the people, who asked not to be identified, as the matter is not yet public.
“The level of concessions being offered now are unprecedented for the industry, without a doubt,” Merrion Capital analyst David Holohan said yesterday. “It shows how committed Ryanair is to doing a deal and willing to do whatever it takes to getting it over the line.”
Flybe shares gained as much as 7.1 percent in London trading. They traded 4.9 percent higher at 48 pence at 8:18 a.m. local time. The stock has retreated 26 percent in the past 12 months, valuing the Devon, England-based company at 36 million pounds.
Flybe said the assets and liabilities would be placed in a new company that it would acquire. The transaction is contingent also on the outcome of the European Union antitrust review and other factors, the airline said
EU Competition Commissioner Joaquin Almunia said last week that Ryanair had “one more time” to discuss the 694 million-euro bid. Dublin-based Ryanair, Europe’s biggest discount airline, owns about 30 percent of Aer Lingus and renewed an attempt in June to buy the rest of the airline.
Ryanair withdrew proposed transfers of slots at London’s Heathrow airport to International Consolidated Airlines Group SA’s British Airways unit, according to the people. That addresses legal arguments that the Irish government, an Aer Lingus shareholder, can block the sale of the slots, they said.
Instead, British Airways would operate flights between Dublin, Shannon and Cork in Ireland and London Gatwick, though hold an option to take over Heathrow slots if Ryanair gains more than 75 percent control of Aer Lingus, the people said.
In an e-mailed response to questions, Ryanair declined to comment on the precise concessions offered. IAG also declined in an e-mail to comment. Antoine Colombani, a spokesman for the European Commission, declined to comment on any new concessions.
The EU blocked a Ryanair 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.
Almunia said last week that United Parcel Service Inc.’s failure to sign a binding deal with a possible buyer for assets of TNT Express NV triggered regulators’ decision to block the takeover last week. Such an up-front buyer would have been required to allay antitrust concerns, he said.