Aer Lingus Eyes Consolidation Via Stake Sale

September 16, 2010

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Aer Lingus can survive as a standalone airline but it might prefer to sell a stake to a larger player to take part in the sector's consolidation wave, its chief executive told the journal Aviation Week.

The former Irish state airline has fended off two hostile bids from Ryanair and Aer Lingus chief executive Christoph Mueller said he did not expect another bid because of opposition from the European Commission and as the shares "have become too expensive for them (Ryanair)."

Mueller said he was exploring closer links with one of the global airline alliances.

"I believe that consolidation around the three alliances will continue," he said, referring to the Star Alliance, SkyTeam and oneworld groups.

"The decision is not straightforward as all three have benefits to Aer Lingus," Goodbody analyst Ken Darmody said in a note.

Mueller also mentioned Lufthansa's purchase of a minority stake in Brussels Airlines as a good model for joining a larger group.

He also did not rule out growing through acquisitions of its own, using Aer Lingus' EUR€1 billion (USD$1.3 billion) gross cash position, Aviation Week quoted him as saying.

Mueller, brought in as CEO a year ago to reverse losses under pressure from Ryanair, said last week he expected demand to stay depressed into 2011 and no longer regarded mimicking Ryanair's fare-cutting as the best way to stimulate business.

(Reuters)