An unwelcome partner

 

Ryanair has already made three unsuccessful bids to take over Aer Lingus in seven years. And its chief executive, Michael O’Leary, has not ruled out another bid, despite the latest setback to his acquisition ambitions. The UK Competition Commission, in deciding that Ryanair must reduce its 29.8 per cent stake in Aer Lingus to 5 per cent, has made a successful takeover on a fourth attempt an even greater challenge, and a less likely outcome.

The UK regulator in reaching its decision said that Ryanair’s large minority stake in Aer Lingus had led, or could lead, to a “substantial lessening of competition” between the airlines on routes between Ireland and Britain, which they dominate. But before the Competition Commission can force Ryanair to implement its decision, the company may appeal the regulator’s ruling - which Mr O’Leary has described as “bizarre and manifestly wrong”. It may be many months before the issue is settled. In the meantime, Ryanair awaits the result of its appeal against a European Commission decision to block its third takeover bid for Aer Lingus.

Mr O’Leary, in his refusal to accept defeat, either in Europe or the UK, has prolonged a battle that few think Ryanair can win. Both the European and UK authorities have taken a similar view in rejecting the takeover on competition grounds. And, as the deputy chairman of the UK regulator, Simon Polito, has pointed out, Ryanair’s large shareholding in its main rival, gives the company an incentive to weaken Aer Lingus as a competitor, and possibly to use its 29.8 per cent holding as a blocking stake to impede the airline’s commercial development. The outlook for Aer Lingus, after seven years of uncertainty about its future, has become a good deal clearer. This week’s decision should allow the company to plan for an independent future, without an unwelcome minority partner and able, as Mr Polito said, to combine with another airline – Etihad Airways has a 3 per cent shareholding – to build scale in order to remain competitive.