IT might horrify the company's management, the trade unions and large sections of the media, but if Aer Lingus is to have a viable future, the Ryanair bid is its only option. And what's more, a Ryanair takeover of Aer Lingus is also in the interests of Ireland Inc.
Aer Lingus quite rightly has a special place in all our affections. It is a wonderful brand. It's our airline and, on balance – notwithstanding the outrageous prices the airline used to charge in the pre-Ryanair days – it has done the state good service.
But the brutal reality is that Aer Lingus will not survive the next decade on its own. Anybody who has taken even a passing interest in the aviation sector over the last couple of years knows that. The airline is currently treading water, a tiny player in a market increasingly dominated by a few global giants. That is simply not viable for long-term survival, never mind prospering and developing.
Management's only realistic alternative to a Ryanair bid would be to find a so-called 'white knight', in the shape of a British Airways or Lufthansa. But while this would suit the top brass in Aer Lingus and greatly cheer the trade unions, it is hard to see how such a move would be in the best interests of either the country or the airline's long-term development.
A foreign airline's interest in Aer
Lingus is likely to be confined to its valuable slots at Heathrow and its large cash reserves. It's hard to see a BA or an Air France-KLM being driven to grow the Aer Lingus business – why would they want or need Aer Lingus to develop services in Europe or on transatlantic routes that their core operation can already provide? Under foreign ownership, Aer Lingus would simply become a largely irrelevant regional arm.
Ryanair, on the other hand, has promised to give the government outright control over the Aer Lingus slots at Heathrow. It also has an unarguable track record in aggressively growing its business. There is every reason to believe that as part of Ryanair, Aer Lingus would be a considerably bigger airline in five years' time than it is today.
The argument that Michael O'Leary would simply turn Aer Lingus into a Ryanair mark II just doesn't have any credibility. Why would O'Leary want to create another Ryanair? All he has to do is to expand the airline's services rather than going to the trouble of acquiring another airline, tackling its cost base and dealing with the unions. He clearly wants Aer Lingus as a differentiated product offering. Where Ryanair flies to Charleroi outside Brussels, Aer Lingus will continue to fly to Brussels International Airport.
Opponents of the deal will inevitably argue that a merged Ryanair-Aer Lingus entity will lead to reduced competition on flights into and out of Ireland and, therefore, higher air fares. Leaving aside, for a moment, the irony of union figures advocating increased competition, that is a legitimate point to raise.
However, O'Leary has promised to cut short-haul fares in Aer Lingus by 5% in each of the three years after any takeover. He has also promised to eliminate fuel surcharges. Of course, it will be argued that this is just clever PR window dressing on the party of Ryanair. Even if that is the case, the Ryanair business plan is about putting bums on seats – using low airfares to ensure high load factors. That is the case even on routes where Ryanair faces little or no
competition. Why would O'Leary suddenly change that approach on acquiring Aer Lingus? Even if he did look to milk margins on a particular route, there would be nothing to stop another airline coming in with a cheaper product offering.
Ryanair is a genuine Irish success story. As a country, we are heavily dependent on foreign multinationals for employment creation. Ryanair is one of the very few Irish multinational companies. In what is arguably the toughest business sector of all, it has succeeded in becoming one of Europe's main carriers and, unlike most of its competitors, has remained hugely profitable in that time. Not only that but it has single-
handedly rewritten the rules for airline travel in Europe.
The price that Michael O'Leary is currently offering is far too low and seriously undervalues Aer Lingus. But that is merely an opening gambit. There will be a higher bid. Whether or not that higher bid is enough to get control of Aer Lingus is very much open to question.
But commercial realities suggest that, whether it is sooner or later, Ryanair will own Aer Lingus one day – the only question is 'when?'. The prospect of a world-leader Ryanair-Aer Lingus company competing with, and outdoing, the traditional airline giants such as BA, KLM and Lufthansa is something we in this country should be genuinely excited about.
The board at Aer Lingus, the unions and, most particularly, the government should see the Ryanair bid as an opportunity, not something to be feared. At the very least, they owe it to us to come up with a credible and viable alternative to secure the future of Aer Lingus.