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Ryanair May Have to Reduce Its Stake in Aer Lingus

Ryanair May Have to Reduce Its Stake in Aer Lingus

Ryanair faces having to reduce its shareholding in Aer Lingus after the UK Competition Commission provisionally decided that its 29.8% stake could reduce competition on routes between Britain and Ireland. In a summary of its provisional findings, the CC concluded that the shareholding gives Ryanair the ability to influence the commercial policy and strategy of Aer Lingus, its main competitor on these routes.

The CC has provisionally found that, against a background of consolidation in the airline industry, Ryanair’s shareholding obstructs Aer Lingus’s ability to merge or combine with another airline to build scale and achieve synergies to remain competitive.

UK Competition Commission Logo

The CC has also found that Ryanair’s shareholding allows it to block special resolutions by Aer Lingus and to hinder its plans to issue shares and raise capital; it could also prevent its rival from disposing of its valuable slots at Heathrow Airport.

The CC has published a notice of possible remedies that seeks views on how much of its shareholding Ryanair should have to sell and whether such a disposal should be accompanied by other safeguards, should the CC’s provisional findings be confirmed.

Simon Polito, CC Deputy Chairman and Chairman of the Ryanair/Aer Lingus inquiry group, 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 Office of Fair Trading (OFT) referred the case to the CC in June 2012, shortly after which Ryanair made its third bid for Aer Lingus, following previous unsuccessful attempts launched in 2006 and 2008. The most recent bid was investigated by the European Commission and prohibited in February 2013.

The CC’s own inquiry was extended while Ryanair sought to challenge the CC’s jurisdiction in view of the European Commission investigation. The Competition Appeal Tribunal (in August 2012) and the Court of Appeal (in December 2012) both dismissed Ryanair’s challenges and the Supreme Court refused it permission to appeal further in April. The CC restarted its investigation in March 2013.

The CC is expected to publish its final report by 11 July 2013.

The CC would like to hear from all interested parties, in writing, on the provisional findings report by no later than 20 June 2013 and on the notice of possible remedies by no later than 11 June 2013. To submit evidence, please email Ryanair.Aerlingus@cc.gsi.gov.uk or write to:

Inquiry Manager 
Ryanair/Aer Lingus inquiry
Competition Commission 
Victoria House 
Southampton Row, 
London
WC1B 4AD.

Airline Responses

Aer Lingus welcomed the announcement and said: “Aer Lingus looks forward to continuing to assist the UK Competition Commission in its investigation into the anti-competitive effects of Ryanair’s minority shareholding. The issuing of the final report is expected by 11 July 2013.”

In a statement, Ryanair said: “Should the Competition Commission maintain this untenable position in its final decision (due in July), Ryanair will appeal that decision to the UK Competition Appeals Tribunal and thereafter, if necessary, to the Court of Appeal. Until the outcome of this UK appeal, and the completion of Ryanair’s appeal against the European Commission’s February 2013 prohibition decision, the CC cannot impose any remedies, however unlawful, on Ryanair.”

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NEIL STEEDMAN has been a trade journalist, editor and proofreader for 53 years, and ITTN's News & Features Editor for 43 years. His travel blog is at www.thetravelbuddhist.com.

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