At least Michael O’Leary started politely enough. The Ryanair chief executive pitched up at a Competition Commission hearing, bristling with indignation over its provisional decision to force the airline to sell down its 29.8pc stake in its Irish rival, Aer Lingus.
“Ladies and gentlemen, good afternoon,” he began, before getting down to business. “As our written submission explains, we strongly disagree with the conclusions reached in the Provisional Findings Report, which are bizarre, unsubstantiated, inconsistent with both the facts and six-and-a-half years of evidence, and wrong in law.”
“Then we really tore a strip off the Noddys,” he laughs, two weeks on. “The whole thing is just a joke. Here you have the UK Competition Commission investigating a six-and-a-half-year-old failed merger between two Irish airlines, the target of which has less than 1pc of UK air traffic. Its impact on UK consumers is negligible. And all they can come up with is ‘well this might possibly happen, that might happen’, while they ignore the evidence of the last six-and-a-half ———— years.
“It’s a bizarre waste of taxpayers’ money. Our last hearing had 19 people: three board members, a whole list of case handlers, legal advisers, economists, someone to hold the door to make sure we left the premises …”
O’Leary has not built Ryanair into Europe’s biggest airline, carrying 80m passengers, without frequent run-ins with the authorities. But rarely has he seemed so exercised by a regulatory decision as the commission’s investigation into whether Ryanair’s stake in Aer Lingus constitutes an SLC – a “substantial lessening of competition”.
The inquiry is going ahead despite the European Commission’s ruling that, over the past six-and-a-half years, competition between the two airlines has actually intensified.
The stake, built between October 2006 and July 2008, is the result of O’Leary’s three failed bids for the Irish flag-carrier – the latest of which, at €1.30 a share, was blocked by the European Commission in February. It’s proved a lousy investment, with Ryanair having already written off much of the €407m (£350m) it paid, although the holding is currently valued at about €250m.
The other big Aer Lingus shareholder is the Irish government, with 25pc.
The Competition Commission published its provisional findings at the end of May, which on O’Leary’s appraisal boil down to “three completely fictitious arguments as to what might happen”.
“First, that Ryanair might frustrate Aer Lingus’s ability to raise money through a rights issue; second, that Ryanair might impede the sale of Aer Lingus slots at Heathrow; and third, that Ryanair might frustrate Aer Lingus from merging with another airline.”
On the first, O’Leary points out that both the commission and Aer Lingus, which has around €1bn of gross cash on its balance sheet, agree that the airline does not need to raise cash. Indeed, the commission’s provisional report says: “We found it unlikely that Aer Lingus would need to raise equity in the medium-to-long term.”
Even so, Ryanair has given a written commitment to both the airline and the commission that it would not block a rights issue. A letter, signed by Howard Millar, Ryanair’s chief financial officer, sent to Aer Lingus in April, states: “Ryanair will of course take up its rights (in order to prevent dilution), which will significantly assist any fund-raising should it be needed.”
As to impeding any sale of Heathrow take-off and landing slots, O’Leary points out that, as recently as April, Ryanair supported Aer Lingus’s planned sale of a pair of slots to British Airways. O’Leary says that the Commission’s concerns are“totally spurious anyway because notionally if they sell Heathrow slots it reduces the competition between Aer Lingus and Ryanair in the Ireland/UK corridor”.
Nor, O’Leary insists, would Ryanair block a bid for Aer Lingus. “If anyone wants to take over Aer Lingus, come talk to us. We’ll happily sell you our share,” he says. “We’ve said that twice in Stock Exchange announcements. When Etihad bought its 3pc stake, we said, ‘do you want to sit down and talk about buying our stake?’ and they politely said no.
“If we are forced to sell down, we’ll struggle to find a buyer because there is none. They say the reason nobody wants to buy is because Ryanair is sitting on Aer Lingus’s share register. No. It’s because they can’t compete with Ryanair in our home market.”
As to any wider influence Ryanair is claimed to exert, O’Leary says: “We have no influence. We’ve just voted against the reappointment of [Irish trade unionist] David Begg to the board. The Irish government made sure he stayed on anyway.”
The commission had been due to publish its report on July 11 but late last month extended its inquiry to September 5. “It’s so they can retire to the shires for the summer and find some evidence, because they haven’t got any,” claims O’Leary.
To this, a commission spokesman says: “It is not unusual to have an extension when you get into the remedies bit of an SLC. We are not going to get into a point-by-point rebuttal but the provisional decision is based on the long-term impact of Ryanair’s stake in Aer Lingus, not just what’s happened so far.”
He says similar inquiries cost around £500,000.
An Aer Lingus spokesman says: “We believe the effects of the Ryanair minority shareholding to be anti-competitive and we look forward to the findings of the UK Competition Commission’s investigation.”
The airline would also deny that British consumers are not affected, given that Ryanair and Aer Lingus account for more than 80pc of the 5m-plus airline seats sold annually in the Dublin-London market alone.
But O’Leary is having none of it. “Why is the UK taxpayer investigating this on the basis that UK aviation will be shattered to its core when they said nothing when BA bought British Midland, took out capacity and closed Bmibaby?
“If you put the number one slot-holder at Heathrow airport with the number two, there will be a substantial lessening of competition. They don’t investigate that. But two Paddy airlines, with a failed merger and a 29pc stake that’s had no influence for 6½ years. Got to investigate that.”
He says the UK is out on a limb, with both the EC “which have said they have no problem with Ryanair’s stake as it doesn’t give us any influence, and the Irish competition authorities which aren’t investigating either. It’s just totally bizarre.”
O’Leary is up for a fight. “If we lose we’ll appeal to the Competition Appeal Tribunal, then the Supreme Court and then the European Court of Human Rights. And if we win, Aer Lingus will appeal. It’s all just a job-creation exercise for the regulators and lawyers.”
You sense we’re a long way from hearing the end of this.