The UK Competition Commission (CC) has ordered Ryanair to cut its holding in rival Irish carrier Aer Lingus from 29.8 percent to 5 percent. Following an in-depth investigation, the CC found 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 CC held 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. In addition, Ryanair potentially could block special resolutions, which likely would restrict Aer Lingus’s ability to issue shares, raise capital and limit its ability to manage effectively its portfolio of Heathrow slots. Finally, the CC felt that Ryanair’s current stake also increased the likelihood of the airline mounting further bids for Aer Lingus, causing disruption to Aer Lingus’s ability to implement its commercial strategy.
Despite proposing a series of remedies in an attempt to address the CC’s concerns, Ryanair failed to convince the UK authority that any remedies would cater for all eventualities in such a volatile industry. The CC concluded, therefore, that the only effective and proportionate remedy to address its concerns was the reduction of Ryanair’s stake to 5 percent, facilitated by the appointment of a Divestiture Trustee. Although welcomed by Aer Lingus, Ryanair has confirmed that it will appeal the CC’s findings.
The CC’s decision is the latest in a series of rulings by UK and European authorities against Ryanair. The airline has launched three failed bids for Aer Lingus in the past eight years, two of which have been blocked by the European Commission. As previously reported, the most recent of these occurred in February 2013 when the Commission found that allowing the takeover would create a monopoly on over 46 highly competitive air routes between the UK and Ireland and would increase fares for passengers. Ryanair’s appeal of this decision is ongoing.