Ryanair may need to give up more than it would like to in order to buy Aer Lingus

Ryanair Holdings Plc offered to surrender half of Aer Lingus Group Plc’s short-haul business as it seeks European Union approval to buy its Irish rival, according to two people familiar with the negotiations.

Ryanair submitted its latest concessions to the European Commission last week and they were sent to competitors and customers for comments yesterday, said the people who asked not to be identified because the talks are private. Some 43 routes would go to Flybe Group Plc, with International Consolidated Airlines Group Plc’s British Airways taking three using London’s Heathrow airport, the people said.

Europe’s biggest discount airline owns about 30 percent of Aer Lingus and in June renewed an attempt to buy the rest. The EU blocked a takeover attempt five years earlier, saying it would create a monopoly for Irish flights. Ryanair’s plan has also drawn opposition from Aer Lingus and Ireland’s government.

“It does appear Ryanair are very keen to get Aer Lingus and are willing to make whatever concessions necessary to make the deal happen,” said Mark Murnane, head of trading at Dublin-based spread-betting provider Marketspreads Ltd. “The big sticking block is that the government has already said no to selling its stock.”

Ryanair Chief

Ryanair Chief Executive Officer Michael O’Leary said today that the company was “trying to tweak” earlier proposals to address regulators’ competition concerns over the 694 million- euro ($923 million) bid for Dublin-based Aer Lingus. He expects a positive decision from the EU by the end of next month, he said in an interview in Rome.

Ryanair has said it could exit all 46 Dublin routes that overlap with Aer Lingus and that several rival carriers are interested in competing at Irish airports. IAG in December signed a non-binding agreement to buy landing slots at Heathrow airport from Ryanair if it completes the planned takeover.

Stephen McNamara, a spokesman for Ryanair declined to comment. Flybe spokesman Mark Garraway and IAG spokeswoman Laura Goodes declined to comment when contacted by Bloomberg News today. Aer Lingus spokesman Declan Kearney declined to comment.

Antoine Colombani, a spokesman for the commission, declined to comment. The commission has a Feb. 27 deadline to rule on the deal.

Government Concerns

The Irish government, which owns 25 percent of Aer Lingus, said last month that Ryanair’s remedies offered until then didn’t satisfy their concerns and it wouldn’t support any offer that would significantly undermine flight connections from the country.

EU officials asked Ryanair earlier this month to come up with further concessions after they identified shortcomings in remedies proposed by the carrier in December, two people said previously. The company’s initial offer last year also failed to convince regulators, two people said in November.

The EU said in August that the takeover could eliminate competition on a large number of routes and few new competitors are likely. The Brussels-based authority blocked Ryanair’s bid for Aer Lingus in 2007, saying a takeover would allow the discount airline to dominate 35 routes and control 80 percent of the market in Dublin.

Exeter, England-based Flybe said in November that it’s “very cautious” on further expansion and would seek to shave 20 million pounds ($32 million) from expenses and consider possible job cuts as an economic slump in the U.K. hurts demand for travel.

With assistance from Kari Lundgren in London. Editors: Peter Chapman, Dara Doyle, Christopher Scinta. To contact the reporters on this story: Joe Brennan in Dublin at [email protected]; Aoife White in Brussels at [email protected]. To contact the editor responsible for this story: Anthony Aarons at [email protected].