Competition watchdog questions Ryanair’s Aer Lingus stake

Ryanair, an Ireland-based no-frills air carrier, has had its 29.8 percent stake in fellow Irish air carrier, Aer Lingus, brought into question by the UK’s Competition Commission.

In its preliminary findings, the Commission said that Ryanir’s interest in Aer Lingus had the potential to reduce competition on routes between the UK and Ireland by influencing the commercial policy and strategy of its main rival on the routes, an accusation that, if upheld, could result in Ryanair being forced to sell its stake.

In response, Ryanair said that the Commission’s findings were unfounded and that it would appeal against the decision. Michael O’Leary, Ryanair’s chief executive described the preliminary ruling as ‘bizarre and manifestly wrong.’

In a statement by Simon Polito, the Commission’s deputy chairman, he also eluded to concerns over the influence that Ryanair could potentially wield over the direction and operation of its rival. He said, ‘Our provisional view is that Ryanair’s shareholding is likely to weaken its main competitor on routes between Great Britain and the Republic of Ireland. Whilst not giving it control over the day-to-day running of its rival, Ryanair’s minority shareholding can influence the major strategic decisions that could be crucial to Aer Lingus’s future as a competitive airline on these and other routes.

‘We were particularly concerned about Ryanair’s influence over Aer Lingus’s ability to be acquired by, merge with, or acquire another airline. We thought it likely that such a combination would be necessary to increase Aer Lingus’s scale and achieve synergies to allow it to remain competitive in future.

‘We recognise that there has been competition between Aer Lingus and Ryanair since 2006. However, without Ryanair’s minority shareholding, competition might have been more intense and may be restricted in the future.

‘Passengers on routes between Great Britain and Ireland will benefit from Aer Lingus continuing to compete vigorously with Ryanair and so Aer Lingus needs to be free to take any actions that will strengthen its position in the future.’

The Commission is now canvassing opinion on how much of its share in Aer Lingus Ryanair should sell and what the terms of such a sale should be, prior to the confirmation of its findings, which are due to be published on July 11.

In a statement on behalf of Ryanair, Michael O’Leary said, ‘While Ryanair is one of the UK’s largest airlines, Aer Lingus has a tiny presence in the UK, serving just six routes to the Republic of Ireland, a traffic base that has declined over the past 3 years and now accounts for less than 1 percent of all UK air traffic. This case, involving two Irish airlines where one accounts for less than 1 percent of the UK’s total air traffic, is yet another enormous waste of UK taxpayer resources on a case which has little if any impact on UK consumers.’

Ryanair has made three attempts to purchase Aer Lingus, the last of which was turned down by the European Commission in February this year.