Ryanair said the European Commission’s move forces its offer to lapse and that it plans to re-bid if the EU eventually approves the deal.
Ryanair, which owns 29.8% of Aer Lingus, in June renewed its pursuit of the rest of the company to bolster its operations in Ireland.
The bid has drawn opposition from Aer Lingus management and politicians. The commission’s initial investigation shows the airlines are direct rivals on many European routes. Regulators set a Jan 14 deadline to rule on the transaction.
“Many of these routes are currently only served by the two airlines,” the commission said. “The takeover could therefore lead to the elimination of actual and potential competition.”
Ryanair said in a statement that Irish takeover rules mean the offer lapses on the Commission’s decision to investigate the deal further. All acceptances of the offer to date are void, it said.
“Ryanair intends to re-bid for Aer Lingus if the European Commission clears its offer following its phase II review,” it said.
Aer Lingus said reasons for the EU to prevent the deal were “even stronger than before” because it competes with Ryanair with more routes to and from Ireland than it did in 2007.
EU regulators blocked Ryanair’s bid for Aer Lingus in 2007, saying a takeover would allow the discount airline to dominate 35 routes and control 80% of the market in Dublin. Ryanair lost a 2010 appeal of the merger ban.
Ryanair chief executive Michael O’Leary reckons the chances of clearing anti-trust hurdles have been boosted by mergers among other European carriers, falling traffic in Dublin that leaves room for new entrants and Government plans to auction its own 25% stake in Aer Lingus.
Any of the EU’s competition concerns could be addressed with appropriate remedies by Ryanair and significant synergies and cost efficiencies resulting from the deal, the company said in July.
Simon O’Connor, a spokesman for the Brussels-based Commission, said any EU decision on the Ryanair takeover would be taken independently of a commitment by the Government to sell its 25% stake in Aer Lingus as part of a bailout package.
“This investigation and the forthcoming decision will be taken on its own merits,” Mr O’Connor said in Brussels.
Mr O’Leary has pledged to lift Aer Lingus’s annual passenger total to 14 million over five years from 9.5 million today and says Ryanair would invest in expanding trans-Atlantic flights.
Ryanair is also facing an investigation by the UK’s Competition Commission of its holding in the smaller carrier after the national regulator said it might lead to higher prices.