Budget airline Ryanair has renewed a hostile bid to acquire Ireland's Aer Lingus, proposing an all-cash yesterday, valuing the target at €748 million.

Ryanair,  Europe's largest low-cost carrier, has offered €1.40 per share of Aer Lingus, which is exactly half of its offer of October 2006, when it had valued its rival at €1.48 billion. Ryanair's offer represents a 25 per cent premium to Aer Lingus' last week's closing price of €1.12.

The previous offer for the Irish airline was opposed by the Irish government which has a 25 per cent stake in the airline. It was also opposed by the airline's workforce. Aer Lingus has an employee share ownership trust holding 14 per cent of the company. The 2006 bid was finally blocked by European competition authorities in June 2007, who said the merged airline would dominate Dublin airport, and the Irish market.

Ryanair has a 29.82 per cent stake in the target company, which it acquired at an average price of €2.50. The airline is awaiting a decision on its appeal against the European competition commission ruling. EU competition commissioner Neelie Kroes had said last year that the unified entity would have led to a near-monopoly in the Irish market, to the detriment of the interests of passengers.

According to Kroes, monopolies are not good for consumers, and the merged airline would have formed a near-monopoly. She said that monopolies, as a rule, reduce consumer choice, lowered quality, and gave rise to higher prices.

Ryanair CEO Michael O'Leary said yesterday that his group had decided in favour of launching a renewed bid given the belief that the competitive landscape had changed substantially, with consolidation starting to sweep the European airline industry.

The original Ryanair bid for Aer Lingus is the only airline takeover that the European competition authorities have voted against. Other airline deals have not raised any objection with the competition authorities, such as Lufthansa's acquisition of Brussels Airlines, BMI British Midlland, and Alitalia merging with Air One in Italy. Lufthansa is also bidding for Austrian Airlines, while British Airways talks to Spain's Iberia.

Ryanair's original bid came close on the heels of the previously state-owned Irish flag carrier being successfully floated in Dublin and London. The trade union SIPTU, which represents a number of the Aer Lingus ground staff and some cabin crew, termed the offer as "mischief making" by an airline keen to create a monopoly.

For its part, Ryanair said it wants to merger the two carriers into a single ''strong Irish airline group under common ownership." It said that the two airlines would operate as separate companies, with Ryanair retaining the Aer Lingus brand, and offering a commitment to double the Aer Lingus short-haul fleet from 33 to 66 aircraft in the next five years, in the process creating around a thousand new jobs. It also plans to reduce Aer Lingus's short-haul fares by five per cent for the next three years, and wants to remove fuel surcharges on its long-haul fares.

Ryanair said the collapse of Aer Lingus' share price from over €3 in December 2006 to less than €1 earlier in the month was the reason it revised its offer. The airline has also forecast operating losses for both 2008 and 2009. The offer would be financed from Ryanair cash reserves.