The European Commission, which vetoed Ryanair’s first takeover bid for Aer Lingus in 2007, said on Wednesday Ryanair had not offered sufficient concessions to allay concerns about the combined company’s dominance or monopoly on 46 routes.
It said the 694-million-euro ($907 million) bid, which was opposed by the Irish government, could hurt competition and lead to over 11 million passengers paying more.
“For (Irish and European passengers), the acquisition of Aer Lingus by Ryanair would have most likely led to higher fares,” EU Competition Commissioner Joaquin Almunia said.
Ryanair, which owns 30 percent of Aer Lingus and has been battling to buy Ireland’s 75-year-old former flag carrier to strengthen its market position, had promised to divest some of Aer Lingus’s routes to British airline Flybe and British Airways in an attempt to win over regulators.
Ryanair described its concessions as unprecedented and rejected the Commission’s arguments.
“We believe that we have strong grounds for appealing and overturning this politically-inspired prohibition,” it said.
Ryanair’s appeal could scare off other possible strategic investors in Aer Lingus and frustrate the Irish government’s efforts to divest its 25 percent stake in Aer Lingus, part of Ireland’s 85-billion-euro EU/IMF bailout.
At 1330 GMT, Ryanair shares were down 1.2 percent at 5.596 euros. Aer Lingus’s were up 0.4 percent at 1.245 euros.
UK competition probe
The Irish government welcomed the Commission’s decision.
“The government’s view very strongly was that we want to see lots of airlines flying in and out of Ireland, lots of competition and lots of routes,” Transport Minister Leo Varadkar told Irish national broadcaster RTE.
“Ryanair spends a lot of time and money in the courts and generally doesn’t get much success from their actions. But that’s a decision for them,” he said of Ryanair’s appeal.
Aer Lingus chief executive Christoph Mueller said Ryanair’s appeal was motivated by a desire to derail a probe undertaken by Britain’s Competition Commission into Ryanair’s stake in the carrier.
Some antitrust lawyers said the Commission’s decision could have implications for another airline merger in the pipeline.
“The Greek carriers Olympic and Aegean will be following this closely for pointers as to how their planned tie-up will be analysed,” said Paul McGeown, a partner at Wilson Sonsini Goodrich & Rosati in Brussels.
Aegean Airlines unveiled its 72-million-euro bid for Olympic Air in October last year, two years after the Commission rejected its first offer. Aegean said its latest proposal aims to ensure its survival in a shrinking market.
The companies are now in informal discussions with the EU competition authority and are expected to formally file for approval of the deal in the coming days.
Copyright (2013) Thomson Reuters. Click for restrictions
Subscribe to Skift Pro
Subscribe to Skift Pro to get unlimited access to stories like these ($30/month)Subscribe Now
Photo credit: Vice-President of the European Commission Joaquin Almunia speaks during a media conference at EU headquarters in Brussels on Wednesday, Feb. 27, 2013. Virginia Mayo / Associated Press