Ryanair Holdings Plc (RYA)’s 694 million- euro ($909 million) bid for Aer Lingus Group Plc (AERL) was blocked by the European Union for a second time after regulators decided it would increase fares and reduce choice on flights from Ireland.
Merging the two Dublin-based airlines would have created a monopoly or a near-monopoly on 46 routes from Ireland, the European Commission said in an e-mailed statement today.
“The acquisition of Aer Lingus by Ryanair would have most likely led to higher fares,” EU Competition Commissioner Joaquin Almunia said in the statement. Ryanair’s concessions “were simply inadequate to solve the very serious competition problems which this acquisition would have created.”
Europe’s largest discount carrier said earlier this month that the EU was planning to block its bid. Ryanair owns about 30 percent of Aer Lingus and in June renewed its attempt to buy the rest after two prior takeover efforts failed.
Ryanair will challenge today’s ruling in the EU courts, the airline said in a statement. It said regulators rejected its proposed concessions in response to “the narrow and misguided political interests of the Irish government,” which owns 25 percent of Aer Lingus and opposed the takeover.
Irish Transport Minister Leo Varadkar, who controls the state stake in Aer Lingus, said “the continued presence of at least two strong competing airlines serving Ireland’s air transport needs is clearly good for competition,” according to an e-mailed statement.
The bid raised “unprecedented” antitrust concerns, the EU said, giving the combined airline an outright monopoly on 28 routes and facing only weak competition from charter airlines on another 11 routes. The joint airline would dominate another seven routes, the EU said.
EU regulators in 2007 blocked a previous Ryanair bid for Aer Lingus, saying a takeover would allow the discount airline to dominate 35 routes and control 80 percent of the market in Dublin. Ryanair lost a 2010 appeal of the merger ban.
Aer Lingus said in a statement today it was pleased with the EU’s prohibition of the deal, saying it was the first time the agency “needed to block the same deal twice.”
In an effort to persuade regulators to approve the deal, Ryanair had offered to pay Flybe Group Plc (FLYB) 100 million euros to take over almost half of Aer Lingus’s short-haul business, indicating the U.K. airline could replace the Irish carrier as a competitor. It also agreed to cede three London routes to International Consolidated Airlines Group SA (IAG)’s British Airways.
Flybe wasn’t a “suitable purchaser” of the Aer Lingus assets, regulators said, and didn’t seem to have financial resources, incentive or experience to operate an Irish carrier on a lasting basis. The regional U.K. operator would have faced “a challenge in operating” the larger Airbus aircraft used by Aer Lingus and had limited experience in the Irish market.
Almunia told reporters today it was unlikely Flybe would have made a profit on the 43 routes it would have operated.
Flybe said it “remains firmly of the view” that Ryanair’s transfer to the company of aircraft and operating routes “would have afforded credible and robust competition, including new jobs and bases in Ireland.”
The EU also said it expected BA would have exited or scaled back on the London routes after an agreed three years of operations.
Ryanair separately faces an investigation by the U.K.’s Competition Commission into its Aer Lingus stake. Ryanair has also said it faces 18 probes by EU regulators examining state subsidies to airports across Europe. Those investigations are examining whether subsidies may have funded lower landing charges and other arrangements that benefited the low-cost carrier over rivals.
Ryanair Chief Executive Officer Michael O’Leary said in September that the company would consider selling its Aer Lingus stake if regulators turned down a “revolutionary” package of concessions.
To contact the reporter on this story: Aoife White in Brussels at email@example.com
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