Ryanair Ordered to Reduce Stake in Aer Lingus

Irish budget airline Ryanair has been ordered by the UK Competition Commission (UKCC) to reduce its 29.8% stake in rival carrier Aer Lingus to just 5%.

The commission’s final report confirmed its provisional findings that Ryanair’s shareholding could “substantially lessen” competition on routes between the UK and Ireland. Ryanair said that it plans to appeal against the ruling.

“The report by the UKCC is bizarre and manifestly wrong but also entirely expected,” said Ryanair chief executive (CEO) Michael O’Leary. He described the investigation into Ryanair’s stake in Aer Lingus as “manifestly unfair” and said that the company’s lawyers would lodge an appeal with the Competition Appeal Tribunal in the coming weeks.

Ryanair has made repeated attempts to buy Aer Lingus, which welcomed the UKCC’s report. “The Competition Commission should be commended on its thorough investigation,” said Aer Lingus chairman Colm Barrington.

“It was unacceptable that our principal competitor was allowed to remain on our share register with a shareholding of 29.8% and interfere with our business despite the European Commission [EC] blocking both Ryanair’s first hostile takeover attempt six years ago and its most recent hostile takeover attempt earlier this year.”

International law firm Cadwalader, Wickersham & Taft also welcomed the UKCC decision, describing it as a very significant milestone in a protracted legal battle which has repeatedly stretched the boundaries of both EU and UK merger control and thrown up untested issues as to the interplay between EU-level and national competition regimes.

UK law allows merger control scrutiny of minority shareholdings which do not count as mergers under EU rules.

“Ryanair’s 29.82% shareholding has been used as a Trojan horse against Aer Lingus for the last seven years since the original 2006 bid,” said Alec Burnside, managing partner of Cadwalader’s Brussels office, and counsel to Aer Lingus

“It has been the platform for Ryanair’s failed rebids for Aer Lingus in 2008 and 2012. The UKCC has now found that those rebids have harmed competition between the two rivals. The EC needs jurisdiction to scrutinise and protect businesses from anti-competitive minority shareholder situations like this one.”

In part as a result of the unique issues presented by this case, the EC is currently consulting on whether to change its legislation.

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