Ryanair has criticised the UK Competition Commission's (CC's) provisional decision that Ryanair "has influence" over Aer Lingus and that this "could reduce competition".
It means the low-cost airline could be forced to sell-down its stake in rival Aer Lingus after the competition watchdog said it potentially distorted the market for flights between Ireland and Britain.
The UK’s Competition Commission said in provisional findings that Ryanair’s 29.8%shareholding in Aer Lingus was likely to “weaken its main competitor” and could hold it back from remaining competitive by threatening to block any merger or acquisition deals with other airlines.
Ryanair boss Michael O’Leary vowed to appeal any final decision that it will have to reduce its stake in Aer Lingus, claiming the initial findings were “bizarre and manifestly wrong”.
The commission is considering whether Ryanair, which has held a stake in Aer Lingus for six-and-a-half years, should cut its holding to below 25% to reduce its influence on the Irish rival and is seeking views on appropriate levels.
This airline has said the "unfounded claim" is disproven by the European Commission’s recent (Feb 2013) ruling that competition between Ryanair and Aer Lingus has "intensified" since 2007.
It said: "Under EU law, the UK CC has a duty of 'sincere cooperation' with the EU, and cannot contradict or reach different conclusions to the European Commission’s findings. Inexplicably, today’s provisional decision by the CC infringes this duty of sincere co-operation by ignoring the recent findings of the European Commission.
Should the CC maintain its position in its final decision on July 11, Ryanair will appeal that decision to the UK Competition Appeals Tribunal and thereafter, if necessary, to the Court of Appeal.
Ryanair’s Michael O’Leary said: "This provisional decision by the UK CC is bizarre and manifestly wrong. The CC’s finding that Ryanair’s shareholding obstructs Aer Lingus’ ability to attract other airlines was disproved by Etihad’s purchase of a 3% stake and the evidence submitted by other large EU airlines, which confirmed that Ryanair’s shareholding was not a barrier to other airlines acquiring a stake in Aer Lingus.
"While Ryanair is one of the UK’s largest airlines, Aer Lingus has a tiny presence in the UK, serving just 6 routes to the Republic of Ireland, a traffic base that has declined over the past three years and now accounts for less than 1% of all UK air traffic. This case, involving two Irish airlines where one (Aer Lingus) accounts for less than 1% of the UK’s total air traffic, is yet another enormous waste of UK taxpayer resources on a case which has little if any impact on UK consumers.
He said that UK taxpayer interests would be better served if the UK Competition Commission investigated BA’s recent takeovers of BMI, Iberia and Vueling, "instead of wasting time pursuing this Irish case, which is of no consequence to UK consumers".
Simon Polito, deputy chairman of the Competition Commission and chairman of the inquiry group, said: “We recognise that there has been competition between Aer Lingus and Ryanair since 2006.
“However, without Ryanair’s minority shareholding, competition might have been more intense and may be restricted in the future.
“Passengers on routes between Great Britain and Ireland will benefit from Aer Lingus continuing to compete vigorously with Ryanair and so Aer Lingus needs to be free to take any actions that will strengthen its position in the future.”
The commission is particularly concerned that Ryanair could prevent Aer Lingus from joining forces with other airlines to increase its scale and competitiveness, while also potentially blocking moves to raise capital from shareholders or selling valuable takeoff and landing slots at Heathrow.
Mr Polito added: “Whilst not giving it control over the day-to-day running of its rival, Ryanair’s minority shareholding can influence the major strategic decisions that could be crucial to Aer Lingus’s future as a competitive airline on these and other routes.”
Aer Lingus said it “looks forward to continuing to assist the UK Competition Commission in its investigation”.
The Competition Commission is expected to publish its final report by July 11.