UPDATE 1-Aer Lingus says will seek investor to thwart Ryanair

By Carmel Crimmins and Jonathan Saul

DUBLIN, Dec 12 (Reuters) - Aer Lingus will seek a friendly investor to take a majority stake in the airline and stave off a 750 million euro ($989.3 million) bid from arch-rival Ryanair, its chairman was quoted saying on Friday.

'If they don't get us this time around, they won't get us again because I am not going to stay as chairman for three years and have this hanging over me,' Colm Barrington said in an interview with the Irish Times newspaper.

Barrington said he had not identified a perfect partner for Aer Lingus, but said from a consumer and a country point of view Air France KLM 'would be a better option than Ryanair'. Air France KLM declined comment.

Aer Lingus's board rejected Ryanair's all-cash bid of 1.40 euros a share, arguing it significantly undervalued the airline.

Europe's biggest budget airline tried to buy Aer Lingus for double the price of its current bid in 2006, but was thwarted by an EU ruling that it would create a near monopoly in European flights out of Dublin.

Yet Aer Lingus's campaign to remain independent could be a hard sell when small airlines are being gobbled up across Europe.

Analysts say the wave of consolidation could give Ryanair a greater chance of success in getting its offer past European competition authorities. But Barrington, who was appointed chairman in September, was not convinced.

'Airline consolidation is bit like sex, there's more talk about it than actually takes place,' he said.



PERFORMANCE BOOST

Aer Lingus said this week it expects a job-cutting deal with unions will boost its performance next year after securing 50 million euros on savings. Before it secured the deal, Aer Lingus had said it would report an operating loss next year.

Barrington did not rule out a link-up with a private equity group. 'It could be a short-term solution for independence, but private equity can be fickle too,' he said.

Barrington, who knows Ryanair Chief Executive Michael O'leary from their days working for the airline's founder Tony Ryan, said Aer Lingus would also consider issuing shares to dilute their rival's near 30 percent shareholding.

Ryanair has tried to appeal directly to the government and employees, holders of more than 25 percent and 14 percent of the former state carrier.

Aer Lingus shares were trading 4.2 percent lower at 1.43 euros in London by 1036 GMT, while Ryanair's shares dropped 3.4 percent to 2.92 euros.

Ryanair has said it would recognise trade unions at Aer Lingus, in contrast to its own company policy. It said it would give the Irish government control over Aer Lingus's valuable landing slots at London Heathrow airport and restore the Shannon to Heathrow route.

But unions have rejected the guarantees and remain concerned over job prospects.

Barrington told public broadcaster RTE on Friday the company was looking at various options with regard to investors.

'What I want to do is ensure that Michael O'Leary and Ryanair are not in a position to keep harassing us,' he said.

(Additional reporting by Paris bureau; Editing by David Holmes) ($1=.7581 euros) Keywords: AERLINGUS RYANAIR/ ([e-mail]; [phone]; Reuters Messaging: [e-mail]) COPYRIGHT Copyright Thomson Reuters 2008. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.