Ryanair warns it will challenge any attempt to force it to sell Aer Lingus stake

Ryanair will challenge any attempt by the UK authorities to force it to sell part or all of its 29.8 per cent stake in Aer Lingus, the airline warned yesterday.

The UK's Competition Commission has provisionally ruled that Ryanair's stake is likely to "weaken" Aer Lingus, its main rival on routes between Ireland and Britain, and lessen competition between the pair.

It proposed a series of remedies to this, should a final decision in July confirm its finding, including ordering Ryanair to sell all or part of its shareholding, or a partial disposal accompanied by other measures likely to enhance competition between the two.

In response, Ryanair said that should yesterday’s provisional ruling be confirmed, it would “appeal that decision to the UK Competition Appeals Tribunal and thereafter, if necessary, to the Court of Appeal”.

'Manifestly wrong'
Chief executive Michael O'Leary called the decision "bizarre and manifestly wrong" and argued that last February, the European Commission found that competition between the pair has intensified since 2007.

Along with direct competition concerns, the commission found that Ryanair’s stake allows it to block special resolutions, potentially hinder any bid to raise capital and to prevent its rival from selling its valuable slots at Heathrow Airport.

Competition Commission deputy chairman Simon Polito, who led its 11-month inquiry into the relationship between the two, said that while not giving it total control, Ryanair’s minority stake could influence strategic decisions crucial to Aer Lingus’s future as an airline on the Ireland-Britain and other routes.

“We were particularly concerned about Ryanair’s influence over Aer Lingus’s ability to be acquired by, merge with, or acquire another airline,” Mr Polito said, adding that the commission thought that such a move would be necessary to allow the smaller airline to remain competitive in the future.

He said that the commission recognised that there had been competition between the two since 2006, when Ryanair took its stake in Aer Lingus, but argued that it might otherwise have been more intense.

Mr O’Leary dismissed the commission’s warning that other airlines could be discouraged from buying into Aer Lingus, saying that Etihad’s purchase of 3 per cent of the company, and submissions from other carriers confirming that the Ryanair stake would not dissuade other investors, disproved this.

Aer Lingus welcomed the commission’s provisional finding yesterday.