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Ryanair may go to court if Aer Lingus bid blocked

Ryanair CEO Michael O'Leary gestures during a news conference in Madrid, September 20, 2012. REUTERS/Paul Hanna
Ryanair CEO Michael O'Leary gestures during a news conference in Madrid, September 20, 2012. REUTERS/Paul Hanna

By Conor Humphries

DUBLIN (Reuters) - Ryanair may mount a legal challenge if its bid to buy Irish rival Aer Lingus is blocked by the European Union but it will not pursue further acquisitions if the merger ultimately fails, its chief executive said on Friday.

Michael O'Leary, who in 20 years has expanded Ryanair from six planes to 300, is trying for the third time to buy Ireland's once dominant airline, but the European Union says the deal may curb competition.

O'Leary told Reuters that if the effort fails, the airline will focus on growing organically and take advantage of the "enormous" opportunities created by the rapid deterioration in the finances of European legacy airlines like Iberia and SAS.

"If it is not approved I can always appeal to the European courts... it is one of the options that would be available to us," O'Leary said.

"If they don't allow this, we'll just have to give up and grow organically," he said.

The European Commission, which is due to make a decision on whether to approve the merger early next year, this week sent Ryanair a list of objections to the tie-up.

The statement was seen by some analysts as a set-back for Ryanair's bid but O'Leary said the EU move was a procedural step which did not necessarily mean additional remedies were required. "It doesn't go that far," he said.

Ryanair has already submitted a package of remedies to the commission that includes a commitment from at least two "major EU airlines" to set up bases in Dublin as part of a series of measures to allay concerns the merger would curb competition.

"There is nothing in the objections that can't, and in our humble opinion won't, be addressed by our remedies package," he said, adding that he would consider additional steps if needed.

The fact that Aer Lingus' share price is trading significantly below the bid price of 1.30 indicates that the markets is cautious on the deal, O'Leary said.

"The dynamic is there because we have kept very quiet through the whole process, the vacuum has been filled by Aer Lingus and other commentators who are not aware of what the remedies are," he said.

ENORMOUS OPPORTUNITIES

Ryanair is planning to fly 120 million passengers by 2022 and whether or not Aer Lingus' 9.5 million passengers are folded in, most of the growth will be organic.

The airline's growth is set to accelerate in the coming five years as it boosts short-haul capacity in Western Europe as flag carriers such as SAS and Iberia cut back.

"The scale of the opportunities being presented to us in the next year or two are enormous," O'Leary said.

The biggest danger for Ryanair is that legacy carriers collapse overnight leaving too large a capacity hole to fill at short notice, he said.

Ryanair's expansion plans require a large plane order, likely over 200 planes with the first to be delivered in the summer of 2015.

Ryanair is not tied to Boeing , which it has exclusively used in the past, but the most likely order would be a mixture of Boeing 737 NGs and its upgrade, the 737 Max.

A softening of the market for long-haul aircraft might allow Ryanair to buy a fleet of planes to set up a low-cost transatlantic service in between three and five years, he said.

Ryanair, which is headquartered in Dublin, said despite the country's strong roots in Ireland, it will not stay if the country's low 12.5 percent corporate tax rate is raised.

The tax rate has been criticized by other EU states as giving Ireland an unfair advantage in attracting foreign direct investment, but the government has so far resisted efforts to change it.

"If corporation tax goes up, Ryanair will be gone in the morning," he said.

(Reporting by Conor Humphries; Editing by David Cowell)

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