December 22, 2008
Irish airline Aer Lingus pledged to make a small profit in 2008 and 2009 as it set out its case against the EUR750 million euro (USD$1 billion) takeover bid from Ryanair.
Aer Lingus, already nearly 30 percent owned by its low-cost rival, said in a statement on Monday the offer significantly undervalued the group and said it could succeed as an independent carrier.
"Despite... extremely challenging conditions, we expect to achieve profit overall in 2008," Chairman Colm Barrington said in an open letter to shareholders, adding that cost cuts and lower fuel prices had boosted the group's prospects.
Director of Corporate Affairs Enda Corneille later said the 2008 profit would be small and would not include the cost of restructuring the airline's work force in the autumn.
"We will make a small pretax profit in 2008 pre-exceptional costs, with the same again in 2009," he said, without giving the exact cost of the restructuring.
Ryanair replied in a statement that it was misleading to forecast a profit when after tax and exceptional items the carrier would in fact make a loss.
"The reality is that Aer Lingus has incurred substantial -- as yet undisclosed -- exceptional costs, and companies have to pay tax, so the result will be another year of substantial net losses," Ryanair chief executive Michael O'Leary said in a statement.
Aer Lingus shares closed up 4 percent at 1.51 euros, still at a premium to the value of the offer, while Ryanair's shares were down 2.2 percent at 3 euros.
Ryanair has bid 1.40 euros a share in cash for the portion of Aer Lingus it does not already own and wrote to shareholders directly last week.
The offer values the rump shares at EUR 525 million and the entire airline at EUR750 million -- about half what it offered in an earlier takeover attempt two years ago.
That bid was blocked by the European Commission for being anti-competitive and Barrington said he saw no reason why regulators would think any differently this time around.
Corneille said Aer Lingus had not received any contact from third parties interested in trumping the Ryanair offer. He said the airline would discuss the approach in detail with the Irish government, a 25 percent shareholder, in the new year.
Aer Lingus, which said it had net cash of EUR803 million, is also reviving its route from London's Heathrow to Shannon in the west of Ireland following agreements with staff on work practices.
The decision was welcomed by Ireland's Minister for Transport, Noel Dempsey.
(Reuters)
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