By Rhys Jones and Conor Humphries
LONDON/DUBLIN, Feb 6 (Reuters) - British airline Flybe has
agreed to create a new carrier as part of a deal with Ryanair to
satisfy regulatory concerns over the Irish carrier's last-ditch
bid to take over peer Aer Lingus.
The new carrier, Flybe Ireland, would receive 100 million
euros ($135 million) and nine aircraft from Ryanair and commit
to operating 43 routes for at least three years if Ryanair's Aer
Lingus bid succeeds, Flybe said.
Ryanair, Europe's leading low-cost carrier, is making its
third attempt to take over smaller Irish rival Aer Lingus and
has been told by the European Commission it has one last chance
to submit measures to prove the merger will not curb
Ryanair will also provide Flybe Ireland with forward sales
cash and liabilities worth around 50 million euros.
In return Flybe will pay Ryanair 1 million euros for the
newly created airline.
In addition to the Flybe deal, Ryanair will pass Aer
Lingus's routes from London's Gatwick Airport to British Airways
, a source close to the talks said.
Flybe said on Wednesday the deal had received "irrevocable
acceptances" from 64 percent of shareholders, allowing Ryanair
to present it to the European Commission as a binding deal.
"We are not setting up an airline in Dublin as a short-term
project. This is a long-term project," Flybe Chief Executive Jim
French told a conference call. "Flybe Ireland, if it goes ahead,
will be a new, well-capitalized business."
A decision from the European Commission, Europe's
anti-monopoly watchdog, is due by March 6.
"This deal is a step in the right direction but considerable
issues remain," said Merrion Capital analyst David Holohan, who
said the chances of EU approval of the Aer Lingus-Ryanair merger
had increased significantly in recent weeks but were no higher
than 40-50 percent.
Ryanair's takeover target Aer Lingus, meanwhile, said it did
not expect the Flybe deal to convince the European Commission
that the new airline would be capable of offering serious
competition to an enlarged Ryanair.
"This shady deal, where you create an artificial competitor,
funded up front... is simply a joke," Aer Lingus Chief Executive
Christoph Mueller told Irish state broadcaster RTE after
announcing a 40 percent hike in its 2012 operating profit.
"That a weak almost bankrupt carrier is supported to take
out a very strong carrier like Aer Lingus... I believe is not
going to fly," he said.
Flybe said its main competitive advantage was the ability
to introduce high-frequency routes with small planes carrying
less than half the 190 carried on Ryanair's Boeing 737s.
Ryanair agreed to give Flybe the right to use the Aer Lingus
brand for three years to allay European Commission concerns of
Flybe's poor brand recognition in Ireland, he said. If the
merger went ahead, Ryanair could also use the Aer Lingus brand
for some routes, French said.
Aer Lingus shares have climbed from 1.10 euros at the start
of January to 1.30 euros, the level of the Ryanair bid.
Shares in Flybe, which have shed about a third of their
value in the last year amid profit warnings and lay-offs, were
20 percent up at 53.7 pence by 1110 GMT.
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