Ryanair letter - Does Aer Lingus Really Have a ...

LETTER FROM THE CEO OF RYANAIR


Mr Colm Barrington
Chairman
Aer Lingus Group plc
Head Office
Dublin Airport
                                                       8 January 2009

      Does Aer Lingus Really Have A Viable Independent Future?

Dear Chairman,

      We  refer  to  your  22  December  letter  to  all  Aer  Lingus
shareholders in  which you  (wrongly) claimed  that European  airline
consolidation  is  not   really  happening  and   that  Aer   Lingus'
"independence"  strategy   is  a   viable  alternative   to   airline
consolidation. Since  we believe  these  claims are  patently  untrue
perhaps you could explain to  your shareholders why you are  ignoring
the following facts:

1.      Airline  consolidation  is accelerating  across  Europe.  Air
France has in recent years acquired (among others) Cityjet, KLM, VLM,
Martinair and  is  now  in  talks  to  consolidate  with  the  merged
Alitalia/AirOne combine in Italy. Likewise, Lufthansa has acquired or
agreed to  acquire substantial  stakes  in Swiss,  Austrian,  British
Midland and SN Brussels. Lufthansa has also expressed its interest in
consolidating with  Alitalia/AirOne and  is currently  in talks  with
SAS. BA has a  significant stake in Iberia  and both airlines are  in
active merger discussions. Why then has Aer Lingus been bypassed  and
ignored by this pan-European airline consolidation?

2.      Aer Lingus'  own advisor (Goldman  Sachs) doesn't believe  it
has an independent future.  In its latest  airline research paper  (3
Dec.  2008)  Goldman  Sachs  confirmed  its  belief  that  "it  seems
inevitable that all European carriers will  belong to one of the  big
three  groups  (BA,  Lufthansa  and  AF-KLM)  either  through  direct
ownership or  deeper  alliances".  Is there  any  independent  expert
outside of  Aer  Lingus who  has  any faith  that  your  independence
strategy will be successful?

3.      Aer Lingus'  Chairman doesn't believe  it has an  independent
future. In your  interview with the  Irish Times (12  Dec. 2008)  you
"vowed to find a friendly investor who will take a majority stake  in
the airline". You also went on  to claim that from a "consumer  point
of view" and a  "country point of view",  Air France-KLM "would be  a
better option  than Ryanair"  but "I  haven't got  a call  yet".  Aer
Lingus' shareholders are entitled to a progress update on your  "vow"
to find a friendly majority investor  and an explanation as to how  a
friendly  majority   investor   reconciles   with   a   strategy   of
"independence"?

4.      Aer Lingus' Chief Executive doesn't seem to believe it has an
"independent future". In  his "keynote address"  (to the ISTT  Annual
Conference (30 Sept-2  Oct 2008)  in Dublin)  "On the  Future of  the
Travel Industry" Dermot Mannion suggested  that by 2015, there  could
be just  5  large  European airlines  left,  namely  Air  France-KLM,
BA/Iberia, Lufthansa, easyJet  and Ryanair.  Can you  explain to  Aer
Lingus shareholders why your Chief Executive believes that Aer Lingus
may not exist as an independent airline in just 6 years time?

Perhaps this is why Mr  Mannion has recently negotiated an  agreement
with Aer Lingus,  which will allow  him to trigger  the payment of  a
"failure fee" of up to ¤2.8 million  to himself if there is a  change
in control of  Aer Lingus  and he chooses  to resign.  Why would  Aer
Lingus or  Mr  Mannion  discuss,  negotiate or  agree  such  a  large
"failure fee" if  either you or  Mr Mannion really  believe that  Aer
Lingus has an "independent future"?


Yours sincerely,


Michael O'Leary
Chief Executive



The following statements and information are included in this  letter
in accordance with the requirements of the Irish Takeover Rules.

The directors of Ryanair and  Coinside (a wholly owned subsidiary  of
Ryanair and the company making  the Offer) accept responsibility  for
the  information  contained  in  this  letter,  save  that  the  only
responsibility accepted by the directors  of Ryanair and Coinside  in
respect of the  information contained herein  relating to Aer  Lingus
and the  Aer Lingus  Group, which  has been  compiled from  published
sources, has been to ensure that such information has been  correctly
and fairly reproduced or presented (and  no steps have been taken  by
the directors of Ryanair or Coinside to verify such information).  To
the best of the knowledge and belief of the directors of Ryanair  and
Coinside (having taken all reasonable care to ensure that such is the
case), the information  contained herein for  which the directors  of
Ryanair and Coinside accept responsibility is in accordance with  the
facts and does not omit anything likely to affect the import of  such
information.

European Airline Consolidation - Reference to:
Air France acquisition of Cityjet sourced from Air France website -


http://corporate.airfrance.com/en/the-airline/subsidiaries/cityjet/index.html
Air  France  acquisition  of  KLM  sourced  from  AF-KLM  letter   to
shareholders December 2008
Air France acquisition of VLM sourced from OFT decision of 28 October
2008
Air France acquisition of Martinair sourced from AF-KLM  announcement
dated 17 December 2008
Lufthansa acquisition of   Swiss sourced from  Lufthansa 2007  annual
report
Lufthansa agreed  acquisition  of  stake  in  Austrian  sourced  from
Lufthansa press release 5 December 2008
Lufthansa agreed acquisition of stake  in BMI sourced from  Lufthansa
Q3 report 2008
Lufthansa agreed acquisition of stake in SN Brussels sourced from  SN
Airholding announcement 25 September 2008
Lufthansa in talks with SAS sourced  from AFP report dated 3  January
2009 entitled  "Lufthansa  acknowledges talks  with  SAS  management:
media"
Air France and Lufthansa talks with Alitalia/AirOne sourced from  AFP
report dated  12  December  2008  entitled  "Italian  investor  group
formally takes over Alitalia"

Reference to an "independent future"  based on Mr Barrington's
statement that Aer Lingus has a "vibrant future as an independent
airline" made in his letter to Aer Lingus shareholders dated 22
December 2008 and Mr Mannion's statement that "we have a bright
future as an independent carrier" made to the Joint Oireachtas
Committee on Transport on 18 December 2008

Reference  to  Mr  Mannion's  termination  compensation  payment   is
calculated by reference to  (i) 2008 basic  salary of ¤440,000;  plus
(ii)  150%  (of  basic  salary)  annual  performance  related   bonus
totalling ¤660,000; plus (iii) pension contribution totaling ¤312,000
for 2007;  plus (iv)  car  bonus of  ¤32,500;  all sourced  from  Aer
Lingus' defence document dated 22 December 2008 (pages 36 and 37)

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