On Tuesday, low-fare Irish airline Ryanair announced another attempt to buy Aer Lingus. The carrier already owns just under 30 percent of Aer Lingus stock and is now offering to buy more at a 38 percent premium over the last closing price.
The latest offer raises the same two questions that have surrounded this potential deal for several years:
1. Will government authorities allow this to go ahead? In the past, Aer Lingus and the Irish government, which owns 25 percent of the airline, opposed the buyout, and the European Commission viewed it as anti-competitive. Ryanair says that circumstances have changed, but whether this argument will gain any traction is anyone’s guess.
2. If successful, what would Ryanair do with Aer Lingus? Aer Lingus is a legacy airline, operating the same sort of hub-and-spoke system as larger competitors like British Airways and Lufthansa. And, like other legacy carriers, Aer Lingus offers both economy and business classes, and it generally follows conventional legacy line pricing and product practices.
It currently flies directly from Boston, Chicago, and New York to Ireland, and from there to dozens of other cities in Europe. Ryanair, on the other hand, is famous for offering nothing but a rock-bottom economy product coupled with the industry’s longest list of fees and charges, and a distinctly cavalier attitude toward consumers.
Although Ryanair is widely viewed as “the airline you love to hate,” it is, however, profitable and has grown into the largest intra-European airline, with bases around the Continent. Industry speculation is that Ryanair would try to mutate Aer Lingus into a transatlantic low-fare airline much like itself.
The most immediate likely outcome is more delay. And I won’t speculate about governmental actions. Moreover, one can’t dismiss the possibility that Ryanair is just trying to hype Aer Lingus stock before selling the stock it currently owns.
But if Ryanair actually wants to operate Aer Lingus and can finally make the deal, I suspect it will, in fact, remake Aer Lingus in the Ryanair image. And that would mean the most significant low-fare transatlantic initiative since Freddy Laker’s Skytrain in 1977.
Keep in mind that in today’s liberal air service environment, an Irish-based airline is not confined to Ireland. A revamped Aer Lingus could fly nonstop from any big U.S. or Canadian city to any of its European bases.
An Aer Lingus rebirth as a low-fare carrier would come as a welcome change for those North American travelers willing to put up with terrible service and a very poor product to knock some dollars off the price of a ticket to Europe. Although that outcome is probably at least three years away, it’s an intriguing prospect—as is the question of how incumbent legacy airlines would respond. We’ll keep our eyes on this one.
Would you want Aer Lingus to become more like Ryanair?
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