Ryanair faces regulatory pressure to sell stake in Aer Lingus

London: Ryanair faces the prospect of being forced to sell its 30 per cent stake in Aer Lingus following a ruling by the UK’s Competition Commission.

In a provisional ruling published on Thursday, the commission found allowing Ryanair to maintain its stake in its Irish rival could reduce competition on routes between the UK and Ireland and hinder Aer Lingus’s ability to be acquired or merge with another airline.

“While not giving it control over day-to-day running of its rival, Ryanair’s minority shareholding can influence the major strategic decisions that could be crucial to Aer Lingus’ future as a competitive airline on these and other routes,” said Simon Polito, the commission’s deputy chairman.

The commission found Ryanair’s shareholding allowed it to block special resolutions by Aer Lingus and to hinder its plans to issue shares and raise capital. Ryanair could also prevent its rival from disposing of its valuable slots at Heathrow, said the ruling.

Michael O’Leary, Ryanair chief executive, described the commission’s ruling as “bizarre and manifestly wrong”.

“The commission’s finding that Ryanair’s shareholding obstructs Aer Lingus’ ability to attract other airlines was disproved by Etihad’s purchase of a 3 per cent stake and the evidence submitted by other large European Union airlines, which confirmed that Ryanair’s shareholding was not a barrier to other airlines acquiring a stake in Aer Lingus,” he said.

Potential remedies published in the latest ruling include forcing the airline to sell all or part of its 29.8 per cent stake as well as imposing safeguards on Ryanair to protect competition.

The ruling marks the latest blow delivered by regulators to Ryanair’s attempt to control Aer Lingus, which competes with it in the Irish marketplace.

In February Brussels blocked Ryanair’s third bid in eight years to take over Aer Lingus, ruling that the proposed transaction would increase fares for passengers and create a monopoly on 46 UK-Irish routes.

The commission has begun a consultation on the findings, which is scheduled to close on June 20.

Polito said the commission was particularly concerned Ryanair could interfere with Aer Lingus’ ability to be acquired by, merge with, or acquire another airline.

The commission is expected to publish its final report by July 11.

The commission has the power to order companies to divest a minority stake if it finds the holding enables the owner to influence the behaviour and policies of a target company in a way that harms competition.

In 2010 BSkyB was forced to sell 10 per cent of a 17.9 per cent minority stake that it held in ITV when the commission found the shareholding would give rise to a substantial lessening of competition.

Aer Lingus said it welcomed the provisional findings by the commission.

“Aer Lingus looks forward to continuing to assist the UK Competition Commission in its investigation into the anti-competitive effects of Ryanair’s minority shareholding,” it said in a statement.

O’Leary, however, said UK taxpayers interests would be better served if the commission investigated British Airways takeovers of BMI, Iberia and Vueling.

— Financial Times