DUBLIN – Budget airline Ryanair faced growing pressure Thursday to reduce its stake in Aer Lingus after Britain’s anti-trust authority ruled that Ryanair was harming its Irish rival’s ability to compete and form partnerships.
Aer Lingus welcomed the provisional ruling and expressed hope that Ryanair eventually would be forced to sell part or all of its 29.8 per cent stake. Ryanair, Europe’s biggest short-haul airline by passenger numbers, has been trying to acquire its main Dublin-based competitor since 2006 and remains its biggest shareholder.
Ryanair chief executive Michael O’Leary called the UK Competition Commission’s arguments “bizarre and manifestly wrong.”
O’Leary noted that the European Union ruled in February — when it rejected Ryanair’s latest takeover bid — that competition between the two airlines has increased over the past six years.
And he noted that Ryanair’s investment in Aer Lingus had not stopped another potential Aer Lingus suitor, the United Arab Emirates’ Etihad Airways, from taking a 3 per cent stake last year.
O’Leary said if the UK authority doesn’t reverse itself in a final ruling expected by July 11, Ryanair would appeal to the UK Competition Appeals Tribunal and, if necessary, London’s Court of Appeal. Until then, he said, Ryanair did not intend to sell a single Aer Lingus share.
But the senior UK competition investigator, Simon Polito, said Ryanair’s stubborn hold on nearly a third of Aer Lingus shares did weaken the airline’s room for manoeuvr in an industry where partnerships and consolidation have provided key to survival.
“We were particularly concerned about Ryanair’s influence over Aer Lingus’ ability to be acquired by, merge with, or acquire another airline,” said Polito, the Competition Commission’s deputy chairman. “We thought it likely that such a combination would be necessary to increase Aer Lingus’ scale and achieve synergies to allow it to remain competitive in future.”
Polito said the current strong Ryanair-Aer Lingus competition on British-Irish services couldn’t be taken for granted and “might have been more intense” had Aer Lingus had not to spend time and resources resisting Ryanair’s hostile bids. “Aer Lingus needs to be free to take any actions that will strengthen its position in the future,” he said.
Ryanair has launched three takeover bids for Aer Lingus since 2006. It has lost tens of millions in the process, at least on paper, as Aer Lingus’ shares have fallen two-thirds from their original flotation value.
To succeed, Ryanair faces daunting hurdles. The other two biggest shareholders, the Irish government and Aer Lingus employee-controlled trusts, both oppose a takeover, citing Ryanair’s anti-union stance and ruthless business model. The European Union’s competition panel twice has ruled that a Ryanair-run Aer Lingus could not be trusted to keep fares low and competing services high.
Ryanair counters that, without the budget carrier’s competition, Aer Lingus would still be scalping customers on British-Irish routes as a state monopoly — as it had done before Ryanair emerged in the 1990s. O’Leary says he would retain Aer Lingus as a premium brand and build its trans-Atlantic services to the United States.
Since its privatization, Aer Lingus has negotiated codesharing partnerships with British Airways on Ireland-Heathrow routes, KLM on Amsterstam routes, and with both United Airlines and JetBlue throughout North America.
Competition ruling, http://bit.ly/19o9aLr