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Ryanair may be the poster child for poor customer service, but UK flyers have made it one of Europe's most successful carriers. While competition concerns may be an issue where carriers like BA are concerned, it's not realistic to think Ryanair will increase anything but baggage fees on its routes.

Ryanair Holdings Plc may be asked by a U.K. regulator to sell part of its 29.8 percent stake in Aer Lingus Group Plc over concerns the holding may lead to higher prices on routes between the U.K. and Ireland.

The U.K. Competition Commission will publish its provisional report on the stake, worth about 280 million euros ($363 million) based on Aer Lingus’s market value, tomorrow morning before stock market trading opens, the antitrust agency said in an e-mailed statement.

Ryanair, Europe’s largest discount airline, will probably be required to sell the holding to a level below the 25 percent threshold the regulator determines gives a company a “material influence,” said Stephen Smith, a lawyer at Reynolds Porter Chamberlain LLP in London.

“You would expect the Competition Commission to draw down the stake to the amounts courts said were proper” in a similar case involving British Sky Broadcasting Group Plc’s 17.9 percent holding in ITV Plc, Smith, who head’s RPC’s antitrust practice, said in an interview. “It is always considered material influence above 25 percent.”

Ryanair has been fighting with regulators since acquiring the Aer Lingus shares in 2006 as part of an earlier takeover bid that the EU blocked on competition grounds. The two airlines, both based in Dublin, carry more than 80 percent of the 370,000 passengers that travel between the U.K. and Ireland each month, regulators have said.

Declan Kearney, a spokesman for Aer Lingus in Dublin, declined to comment, as did Ryanair spokesman Robin Kiely.

Provisional report

Tomorrow’s report is provisional and Ryanair will be given time to respond before a final decision is released in July. Ryanair will also be able to appeal to the U.K. Competition Appeal Tribunal. The regulators typically give companies as long as a year to sell down the stake.

Ryanair might be able to delay the enforcement of any U.K. ruling for years while it challenges the European Union decision to block its most recent bid to takeover Aer Lingus in February. The EU said a merger would increase fares and reduce choice on flights from Ireland.

“It’s never happened before that you had a national review of a merger that hasn’t happened because of an EU action,” Smith said.

The Competition Commission will look at several factors when determining how much Aer Lingus stock Ryanair must sell. While there is a presumption a 25 percent stake creates “material influence,” the regulator must also find there is an anticompetitive effect, said Timothy McIver, a lawyer at Debevoise & Plimpton LLP in London.

“The concern is you can block resolutions at shareholder meetings,” McIver said. “That’s why you can’t say 15 percent is fine. You have to look at shareholder meetings and calculate what level of holding wouldn’t allow Ryanair to influence the commercial behavior of the company.”

With assistance from Kari Lundgren in London and Joe Brennan in Dublin. Editor: Benedikt Kammel. To contact the reporter on this story: Anthony Aarons at [email protected]. To contact the editor responsible for this story: Anthony Aarons at [email protected]

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Tags: aer lingus, regulators, ryanair

Photo credit: File photograph shows ground crew parking an Aer Lingus aircraft at Dublin Airport in the Republic of Ireland. Paul Mcerlane / Reuters

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