Forced sale of Ryanair Aer Lingus stake could take just months, experts say

It could take regulators just months to force Ryanair to sell most of its stake in Aer Lingus, a number of experts argued yesterday following a ruling by the UK mergers watchdog that the holding should be cut to 5 per cent.

The UK Competition Commission said Ryanair should reduce its stake in Aer Lingus to 5 per cent from its existing 29.8 per cent, on the grounds that the shareholding had led, or could lead to, a substantial lessening of rivalry between the two on routes between Ireland and Britain. The airline said it would appeal the ruling.

Actual sale
Most observers believe that this means it could take years before the commission can order the actual sale, while the airline's chief executive, Michael O'Leary, has argued that the regulator will still have to wait for Ryanair's appeal against the EU decision to block its third bid for Aer Lingus to go through. However, Brussels- based competition lawyer Alec Burnside, of multinational firm Cadwalader, which advises Aer Lingus, pointed out that the Competition Commission said yesterday that it did not believe it had to wait for the EU, limiting its appeal options to the British courts.

On that basis, he said it was possible that all appeal stages against the decision in the UK could be completed “in under a year”, and should Ryanair fail at each of those points, the regulator would then be in a position to force the sale.

Niall Collins, head of EU and anti-trust at Dublin law firm Mason Hayes & Curran, said the Competition Commission also made it clear that it believed there was little chance of a clash between its analysis and that of the EU's institutions, or between either's objectives. "Accordingly, the case could move through the relevant judicial fora in the UK relatively quickly," he said.

Appeal options
Ryanair will first have to go to the UK's Competition Appeals Tribunal, which could rule by late this year or early 2014. If it loses there, it can go to the Court of Appeal. If that goes against the company, it can seek to have the case admitted to the British Supreme Court, but that forum could refuse this, leaving the airline with nowhere else to go.

The industry sees Etihad Airways, which owns 3 per cent of Aer Lingus and has a partnership deal with the Irish carrier, as a likely buyer for the 24.8 per cent stake, should it become available quickly. However, the regulator could order the sale of the shares direct to the stock markets. A divestment trustee would oversee any disposal.

In Europe, Ryanair is appealing the EU Commission's rejection of a proposal, involving BA and Flybe, that it put forward during last year's third unsuccessful bid for Aer Lingus, which was designed to resolve competition issues raised by the fact it would end up operating overlapping routes between Dublin and London.

It is free to launch a fourth bid for its rival as of today, as a 12-month waiting period since the lapse of last year’s offer, required by the Takeover Panel, has passed. It refused to comment yesterday when asked if it was considering a fourth attempt.

British routes
The commission's 11-month investigation focused only on routes between Ireland and Britain. During August, Ryanair had 366 flights a week between the two islands, while Aer Lingus and its regional partner, Aer Arann, had 542 flights a week.

Mr O'Leary described the Competition Commission ruling as "bizarre and manifestly wrong". He pointed out that last February, the European Commission found that competition between Ryanair and Aer Lingus had intensified since 2007, when Ryanair took its stake up to 29.8 per cent.

Aer Lingus welcomed the ruling.