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UK CC Requires Ryanair to Reduce Aer Lingus Shareholding to 5%

UK CC Requires Ryanair to Reduce Aer Lingus Shareholding to 5%

Aer Lingus has welcomed the issue today by the UK Competition Commission of its final report on its investigation into Ryanair’s minority shareholding in Aer Lingus, which concludes that Ryanair’s shareholding in Aer Lingus is anti-competitive and that it must sell down its 29.82% stake to 5%. Ryanair has today confirmed that it will appeal the CC’s final report. Aer Lingus

The CC’s Final Report is at www.competition-commission.org.uk/our-work/directory-of-all-inquiries/ryanair-aer-lingus

The report also requires that:

  • Ryanair may not re-acquire shares in Aer Lingus unless the European Commission grants clearance for an acquisition of control of Aer Lingus by Ryanair under the EU Merger Regulation
  • A divestiture trustee will be appointed to oversee the process of sale of Ryanair’s shareholding in Aer Lingus, taking the divestiture process out of Ryanair’s hands.

Colm Barrington, Chairman of Aer Lingus, said: “Today’s final report by the UK Competition Commission confirms that the minority shareholding in Aer Lingus held by our closest competitor is anti-competitive and contrary to the interests of the approximately 14 million passengers who fly on routes between the island of Ireland and Great Britain. The Competition Commission should be commended on its thorough investigation and we look forward to the implementation of its findings.

“It was unacceptable that our principal competitor was allowed to remain on our share register with a shareholding of 29.82% and interfere with our business, despite the European Commission blocking both Ryanair’s first hostile takeover attempt six years ago and its most recent hostile takeover attempt earlier this year.

“Aer Lingus remains focussed on financial and operational performance and our recent results for the first half of 2013 demonstrate that Aer Lingus continues to deliver an excellent overall performance to the benefit of its shareholders. The implementation of the Competition Commission’s decision that Ryanair must reduce its anti-competitive shareholding will position Aer Lingus for future growth and opportunities that will make it an even stronger competitor in the market.”

CC Statement

In its final report published today, the UK Competition Commission confirmed its provisional findings that Ryanair’s minority shareholding had led or may be expected to lead to a substantial lessening of competition between the airlines on routes between Great Britain and Ireland.

The importance of scale to airlines is clear from evidence of widespread industry consolidation in recent years. Against that background, the CC formed the view that Aer Lingus’s commercial policy and strategy was likely to be affected by Ryanair’s minority shareholding, in particular because it was likely to impede or prevent Aer Lingus from being acquired by, or combining with another airline.

The CC was also concerned that Ryanair’s minority shareholding was likely to affect Aer Lingus’s commercial policy and strategy by allowing Ryanair to block special resolutions, restricting Aer Lingus’s ability to issue shares and raise capital and to limit Aer Lingus’s ability to manage effectively its portfolio of Heathrow slots. Ryanair’s shareholding also increased the likelihood of Ryanair mounting further bids for Aer Lingus, with the associated disruption to Aer Lingus’s ability to implement its commercial strategy.

Simon Polito, CC Deputy Chairman and Chairman of the Ryanair/Aer Lingus Inquiry Group, said: “In light of the comments received in response to our provisional findings and in line with our usual practice, we have reviewed further all the evidence that we received. After careful consideration we confirmed our provisional view that Ryanair’s minority shareholding has resulted, or may be expected to result, in a substantial lessening of competition between the airlines.

“In line with the recent decision of the European Commission prohibiting Ryanair from acquiring Aer Lingus, we recognise that Ryanair and Aer Lingus compete intensely for passengers travelling between Great Britain and Ireland, to the benefit of millions of passengers crossing the Irish Sea each year, and that competition between them is at least as intense now as it was when Ryanair first acquired its stake in Aer Lingus in 2006.

“However, we consider that there is a tension between Ryanair’s position as a competitor and its position as Aer Lingus’s largest shareholder, and that Ryanair has an incentive to weaken its rival’s effectiveness as a competitor. Ryanair’s minority shareholding affects Aer Lingus’s commercial policy and strategy in various ways that could be crucial to Aer Lingus’s future as a competitive airline. We were particularly concerned about Ryanair’s ability, either directly or indirectly, to impede Aer Lingus from combining with another airline to build scale and achieve synergies to remain competitive.

“Ryanair proposed various remedies to us in an attempt to address our specific concerns. In a dynamic and uncertain sector such as the airline industry, however, it is inherently difficult to design remedies that would cater for all eventualities. We concluded that the effective and proportionate remedy that would address our concerns was to require a partial divestment of Ryanair’s shareholding to 5 per cent, facilitated by the appointment of a Divestiture Trustee. Aer Lingus would then be free to take actions to maintain and strengthen its competitive position in the future for the benefit of passengers on routes between Great Britain and Ireland.”

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NEIL STEEDMAN has been a trade journalist, copywriter, editor and proofreader for 50 years, and News & Features Editor for ‘Irish Travel Trade News’ for the past 40 years.

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