Aer Lingus confirms plans to challenge Ryanair's stake
Aer Lingus chief executive Dermot Mannion and chairman John Sharman mounting EU challenge
ALMOST 30pc of Aer Lingus' could come onto the market by the middle of next year, if Aer Lingus succeeds in a new legal bid to remove Ryanair from its share register.
The former national carrier yesterday confirmed plans to launch a European challenge to force its low cost competitor to sell off its 29.4pc Aer Lingus stake.
It is understood that documents are likely to be lodged with the European Court of First Instance by early November, with a verdict expected by mid 2008.
Aer Lingus' move comes after the European Commission (EC) signalled it does not have the right to force Ryanair to sell its shareholding.
Alec Burnside, Aer Lingus' legal counsel in Brussels, confirmed: "We asked the Commission to have a look at it and see if they could force Ryanair to sell," said Mr Burnside. "They're now saying that they can't.
"We don't agree with that; we think that it is within their power to make Ryanair sell, and that's the case we'll be making to the Court of First Instance."
Aer Lingus will also ask the court to make an interim order, barring Ryanair from "interfering" in the running of Aer Lingus; Mr Burnside said that this application could be dealt with early next year.
Ryanair, in a statement, dismissed Aer Lingus' legal manoeuvring.
"Given that Aer Lingus has twice rejected Ryanair's request for an extraordinary general meeting (EGM), it is impossible for Aer Lingus to claim that Ryanair have any influence or control over them," the statement said.
"We presume this initiative was designed to cover Aer Lingus' embarrassment at a current share price of €2.35, which is 20pc less than Ryanair's offer of €2.80 almost one year ago"
If Aer Lingus succeeds in its bid, some 30pc of the company's stock could come back into play by the middle of next year.
Leading analysts stressed it would be "catastrophic" if the entire 30pc were put back onto the stock exchange at the same time.
"You'd have this massive overhang of shares in the market, which would depress the share price down, down, down," explained one.
Mr Burnside, however, suggested this was an unlikely outcome.
"When the Commission requires things to be sold it supervises how that happens," he said. "The yardstick is to make sure competition will continue effectively afterwards."
Aer Lingus may also suggest finding a trade buyer for some or all of the stake. Some sources suggested the climate for a trade buyer was better now than when Aer Lingus floated, because a recent flying deal between the EU and the US makes it easier for non-Irish interests to take large stakes in Irish airlines.
But others said that any trade carrier buying into Aer Lingus would "have to be mental" since Ryanair would be likely to "nuke fares" from Dublin if it was forced to sell its shares.
Another option for Aer Lingus would be to buy back some of the shares, as the company is allowed to buy back up to 10pc of its stock without needing stock exchange approval.
Senior sources in Aer Lingus refused to be drawn on speculation as to what might happen if Ryanair was forced to sell its shares.
Aer Lingus' shares closed down 2c yesterday at €2.34, well below Ryanair's takeover bid of €2.80 a piece.
