RYANAIR has said that it is discussing the sale of a 25 per cent stake in the privately owned airline to "a major international company".
Ryanair has refused to name its possible new shareholder. However, according to weekend newspaper reports in Britain, the Irish company is currently in negotiations with British Airways (BA). Both Ryanair and BA have refused to comment on the report in the Observer that the two are close to concluding a strategic alliance.
Aviation industry sources said yesterday the 25 per cent stake would cost the new investor at least £10 million. The investment would also likely lead to closer links with any new shareholder, sources said. The deal may also contain an exit mechanism for the Ryan family which would see the new investor eventually take full control of Ryanair if certain performance clauses were met.
Ryanair's owner, the Ryan family trust, said in a statement that it expected that due diligence and contract negotiations would be finalised next month. The new investment would "enable Ryanair to continue its expansion of low fare air services in Europe". Although British Airways appears favourite to take the minority stake, senior Ryanair executives are also known to have talked to a number of other potential investors in recent months.
Ryanair is understood to have had talks with US executives involved in Mr Richard Branson's new European low cost airline. A group of investors, led by Mr Branson's Virgin Atlantic, agreed to buy 90 per cent of Euro Belgian Airlines (EBA) recently and plan to transform the company into a low cost operator,
Ryanair representatives were thought to have met Mr Jonathan Ornstein, who would manage Virgin Europe, and the US businessman, Mr David Bonderman, who holds major stakes in Continental Airlines and America West.
Mr Bonderman was to have invested in Virgin's new airline and wanted to buy a second airline - believed to have been Ryanair - to launch a European low fare service. Mr Bonderman recently dropped out of the Virgin project and this has lead to some speculation that he may want to conclude a deal with Ryanair separately through either Continental or America West.
Ryanair, which operates a range of scheduled services from Ireland to Britain with a fleet of 11 Boeing 737 aircraft, is expected to carry about 2.5 million passengers this year. The company is one of the few European airlines to operate a low cost/no frills service and has been successful in recent years.
But despite its improved financial position, Ryanair needs an injection of funds if it is to expand into the European market as the company is still carrying substantial accumulated losses from its start up phase.
Money raised from the sale of the 25 per cent stake would more than likely be used to reduce the company's debt. "It would get a few chips off the table," as one aviation industry source said.
Ryanair, which employs about 550 people, had accumulated losses of £17.6 million in December 1994, according to the most recently filed accounts.
The 1993 accounts show that pre tax profits doubled to £2 million as turnover rose by 13 per cent to £57.1 million. Ryanair's turnover is thought to have since increased to about £68 million.
Weekend reports on a possible Ryanair BA alliance suggested the Irish company would become a BA franchise partner and would take on the British airline's famous livery. However, several Irish aviation industry sources said yesterday that it was highly unlikely that Ryanair would take on the colours of any new shareholder.
"Ryanair will still fly under its own identity, and its commercial strategy will be the same," said one source, who said the deal was likely to be just an investment rather than an operational agreement.
However, other sources argued it would be highly unusual for BA to be happy with a 25 per cent stake.
Ryanair was established in 1985 by Dr Tony Ryan's three sons Cathal, Declan and Shane. It claims to be the market leader on the Dublin London route, with a 38 per cent share.
