Ryanair 2012 Annual Report Download - page 59

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First Instance (―CFI‖; now the ―General Court‖), in July 2010. The CFI upheld the European Commission‘s
decision.
On December 1, 2008, Ryanair made a second offer to acquire all of the ordinary shares of Aer Lingus
it did not own, at a price of €1.40 per ordinary share. Ryanair offered to keep Aer Lingus as a separate company,
maintain the Aer Lingus brand, and retain its Heathrow slots and connectivity. Ryanair also proposed to double
Aer Lingus‘ short-haul fleet from 33 to 66 aircraft and to create 1,000 associated new jobs over a five-year
period. If the offer had been accepted, the Irish government would have received over €180 million in cash. The
employee share option trust and employees, who owned 18% of Aer Lingus, would have received over €137
million in cash. The Company met Aer Lingus management, representatives of the employee share option trust
and other parties, including the Irish Government. The offer of €1.40 per share represented a premium of
approximately 25% over the closing price of €1.12 of Aer Lingus on November 28, 2008. However, as the
Company was unable to secure the shareholders‘ support (to sell their stakes in Aer Lingus to Ryanair), the
Company decided on January 28, 2009, to withdraw its offer for Aer Lingus.
Between 2010 and 2012 the United Kingdom‘s OFT investigated Ryanair‘s minority stake in Aer
Lingus and in June 2012 referred the matter to the UK Competition Commission for further investigation. See
―Item 8. Financial Information—Other Financial Information—Legal Proceedings—Matters Related to
Investment in Aer Lingus.‖
On June 19, 2012, Ryanair made a third offer to acquire all of the ordinary shares of Aer Lingus it did
not own at a price of €1.30 per ordinary share. The timing of the offer has been influenced by: (1) the continued
consolidation of European airlines, and more recently the International Airlines Group (the parent company of
British Airways) takeover of British Midland International, where the No. 1 airline at Heathrow was allowed to
acquire the No. 2; (2) the additional capacity available at Dublin airport following the opening of Terminal 2
and the decline in traffic from 23.3 million passengers per annum in 2007 to 18.7 million in 2011, resulting in
Dublin airport operating at approximately 50% capacity; (3) the change in the Irish government policy since
2006 in that the Irish government has decided to sell its stake in Aer Lingus; (4) the fact that under the terms of
the bailout agreement provided by the European Commission, European Central Bank and the International
Monetary Fund (collectively the ―Troika‖) to Ireland, the Irish government has committed to sell its stake in Aer
Lingus; (5) the fact that the ESOT (Employee Share Ownership Trust) which at the time of the unsuccessful
2006 offer controlled 15% of Aer Lingus, has been disbanded since December 2010 and the shares distributed to
the individual members with the result that, Ryanair‘s new offer is, in Ryanair‘s view, capable of reaching over
50% acceptance either with or without the Irish government‘s acceptance; and (6) the fact that recently, Etihad,
an Abu Dhabi based airline, has acquired a 3% stake in Aer Lingus and has expressed an interest in buying the
Irish government‘s 25% stake in Aer Lingus (the offer now provides Etihad or any other potential bidder the
opportunity to purchase the Irish government‘s stake). Ryanair is willing to offer the European Commission
appropriate remedies to allay competition concerns and it believes that these remedies, as well as the efficiencies
and synergies arising from the combination, should allow the Commission to approve this proposed merger.
Ryanair has offered to keep Aer Lingus as a separate company, maintain the Aer Lingus brand, and to
grow its traffic from 9.5 million to over 14.5 million passengers over a five year period post acquisition, by
growing Aer Lingus‘ short haul traffic at some of Europe‘s major airports where Aer Lingus currently operates
and Ryanair does not. Ryanair also intends to increase Aer Lingus‘ transatlantic traffic from Ireland, which has
fallen in recent years, by investing in operations. If the offer is accepted, the Irish government would receive
€173 million in cash. The offer of €1.30 per share represented a premium of approximately 38% over the
closing price of €0.94 for Aer Lingus shares as of June 19, 2012. The offer is conditional on competition
approval by the European Commission. The Company anticipates that the EU merger review process will be
completed between September 2012 and February 2013.
Responding to Current Challenges. In recent periods, and with increased effect in the 2010, 2011 and
2012 fiscal years, Ryanair‘s low-cost, low-fares model has faced substantial pressure due to significantly
increased fuel costs and reduced economic growth (or economic contraction) in some of the economies in which
it operates. The Company has aimed to meet these challenges by: (i) grounding (approximately 80) aircraft
during the winter season; (ii) disposing of aircraft (disposals totaled three in the 2010 fiscal year, ten lease hand
backs in the 2011 fiscal year and 3 lease hand backs in the 2012 fiscal year); (iii) controlling labor and other
costs, including through wage freezes for non flight crew employees in 2010 and 2011, selective redundancies
and the introduction of Internet check-in; and (iv) renegotiating contracts with existing suppliers, airports and
handling companies. There can be no assurance that the Company will be successful in achieving all of the
foregoing or taking other similar measures, or that doing so will allow the Company to earn profits in any