Ryanair may be forced to trim stake in Aer Lingus

Ryanair may be required to cut its share holding in Aer Lingus over concerns that its 29.8 per cent stake may result in higher fares on flights between Ireland and the UK.

The UK Competition Commission has found that the Ryanair’s stake, valued at about €280 million, gives the airline “the ability to influence the commercial policy and strategy” of Aer Lingus.

Ryanair chief executive boss Michael O’Leary has vowed to appeal any final decision that it will have to reduce its stake in Aer Lingus, claiming the initial findings were “bizarre and manifestly wrong”.

The commission is considering whether Ryanair, which has held a stake in Aer Lingus for six-and-a-half years, should cut its holding to below 25 per cent to reduce its influence on the Irish rival and is seeking views on appropriate levels.

Deputy chairman of the Competition Commission and chairman of the inquiry group Simon Polito, said: “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 commission is particularly concerned that Ryanair could prevent Aer Lingus from joining forces with other airlines to increase its scale and competitiveness, while also potentially blocking moves to raise capital from shareholders or selling valuable takeoff and landing slots at Heathrow.

Mr Polito added: “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.”

Welcoming the findings, Aer Lingus said it “looks forward to continuing to assist the UK Competition Commission in its investigation”.

The Competition Commission is expected to publish its final report by July 11th. If Ryanair is forced to reduce its stake, it could end any hopes the group has of buying Aer Lingus, having tried three times to take over the carrier.

All three bids have been blocked by regulators on competition grounds, with the European Commission (EC) prohibiting such a deal in February — a decision Ryanair is appealing against.

But Mr O’Leary said the Competition Commission contradicts findings by EC that competition between the two airlines has continued and possibly increased since 2007.

He said: “While Ryanair is one of the UK’s largest airlines, Aer Lingus has a tiny presence in the UK, serving just six routes to the Republic of Ireland, a traffic base that has declined over the past three years and now accounts for less than 1 per cent of all UK air traffic.

“This case, involving two Irish airlines where one (Aer Lingus) accounts for less than 1 per cent of the UK’s total air traffic, is yet another enormous waste of UK taxpayer resources on a case which has little, if any, impact on UK consumers.”

The case was referred to the Competition Commission last June after Ryanair made its third unsuccessful bid for Aer Lingus, following two previous approaches in 2006 and 2008.

Dublin-based Ryanair, which operates on more than 1,600 routes, recently posted a 13 per cent hike in annual profits to €569 million and said it increased the number of passengers flown by 5 per cent to 79.3 million in the year to March 31st.

It expects traffic to grow by another two million passengers to 81.5 million in the current year, helped by this summer’s addition of more than 200 routes and seven new bases, including at Eindhoven, Krakow and Marrakech.

Reuters