Ryanair to fight Aer Lingus deal veto

The low-cost Irish airline Ryanair is preparing to appeal against a forthcoming European Commission ruling blocking its €1.48 billion-bid for rival Aer Lingus.

Competition Commissioner Neelie Kroes will be accused of buckling under intense political pressure from the Irish government, which strongly opposed the bid when it was launched in October last year.

The centre-right Irish government, which owns a quarter of Aer Lingus, has lobbied hard against the merger, which was announced days after it sold much of its 85.1% stake in the company last year. The Commission’s subsequent opposition to the bid, due to be announced this month ahead of a 4 July deadline, comes despite Ryanair’s proposals of remedies aimed at preserving competition at Dublin airport.

Ryanair chief executive Michael O’Leary will accuse the Commission of double-standards, given its previous approval of mergers between Air France and KLM in 2004, and between Lufthansa and Swiss Air in 2005. According to Ryanair spokesperson Peter Sherrard, the company intends to remain "long-term share-holders" in Aer Lingus after launching legal action.

Details of this month’s decision, obtained by Reuters, indicate plans to force Ryanair to sell some of its 25.2% stake in Aer Lingus. The elimination of "the most credible market entrant", Aer Lingus, on 37 Dublin routes is cited as a primary cause for concern that will lead to higher prices and reduced consumer choice.

One Brussels-based industry lawyer backed the Commission’s ruling, saying that the previous approvals in 2004 and 2005 did not contradict the Commission’s expected decision on Ryanair’s bid for Aer Lingus. "Here you have an economy on the edge of Europe without major carriers based there," he said. Antitrust approval of Air France’s bid for KLM would have been influenced by the fact that two major cities - Paris and Amsterdam - were involved in the Commission’s deliberations, he said.

But BNP Paribas analyst Nick van den Brul said that the tendency in the past has been to accept airlines’ proposed remedies designed to introduce competition on specific routes. Ryanair’s proposed remedies, including guaranteed fare and fuel surcharge reductions amounting to more than €100 million per annum for Aer Lingus passengers and the surrender of a significant number of Heathrow and Dublin slots, have been rejected outright by the Commission.

O’Leary, who has previously criticised the Commission for putting the political interests of the Irish government first in its consideration of the deal, is confident that his legal challenge will be successful, given the "significant inaccuracies and omissions" in the Commission’s statement of objections sent to the company in March.

In anticipation of Ryanair’s appeal, the Commission has prepared a lengthy defence of its ruling. "What O’Leary says in public when he shouts his head off is not necessarily true," said the lawyer. "Just because the Irish government has a known position on this doesn’t mean the Commission has done what they want."

The low-cost Irish airline Ryanair is preparing to appeal against a forthcoming European Commission ruling blocking its €1.48 billion-bid for rival Aer Lingus.