Ryanair calls EC position ‘bizarre’ as takeover bid suffers setback

RYANAIR’S bid to take over Aer Lingus has received a significant setback from the European Commission.

In an initial response, the commission has said the proposed purchase would significantly interfere with competition as Ryanair has 43% of Dublin Airport’s passenger traffic and Aer Lingus has 37%.

A furious Ryanair described the findings as bizarre and accused the commission of being politically motivated and toadying to the wishes of the Government.

Details of the commission’s 265-page response to Ryanair’s bid were leaked to Bloomberg News on Thursday, sometime after Ryanair received it.

It says that the planned €1.48 billion takeover would eliminate the “most credible potential entrant” on 37 routes to and from Dublin and so impede effective competition.

Aer Lingus employee shareholders and the Government that own 40% of the shares between them are against the hostile takeover. Ryanair bought about 25% of the shares late last year.

They have argued that because the country is an island it is essential to maintain at least two airlines providing a service. A merger with Ryanair would leave the country with just one service.

Ryanair has been invited to respond to the commission’s findings and to a possible list of conditions they would need to meet before any takeover could go ahead. The commission will make its final decision known by June 13.

A statement from Ryanair criticised the leaking of the report and have made an official complaint to the Competition Commissioner Neelie Kroes and Commission President Jose Manuel Barroso.

But they confirmed the document’s contents, saying the findings were “clearly designed to appease the political interests of the Irish Government”.

It said the findings that a merger “is likely to significantly impede effective competition” are unsupported by the facts and Ryanair’s commitments to reduce Aer Lingus’s fares each year for a four-year period; reduce fuel surcharges; improve their fleet and product and significantly reduce Aer Lingus’s cost base.

Ryanair’s head of communications, Peter Sherrard accused the commission of applying different standards to Ryanair than they have to a raft of recent airline takeovers in Europe.

“At a time when British Airways is considering purchasing BMI, when Iberia is the subject of takeover approaches from British Airways, Air France and Lufthansa, when Alitalia is the subject of takeover approaches by Lufthansa and Air France, the suggestion that two Irish airlines — which combined, account for less than 5% of EU air travel — should not be allowed to merge is a bizarre and clearly political, rather than a competition position.

“It is clear that the EU Competition Commission is applying a different and unique standard to the Ryanair-Aer Lingus offer which flies in the face of all previous decisions and runs contrary to the wave of mergers and takeovers which is now in train following EU-US open skies,” he said.

Aer Lingus and the commission refused to comment yesterday on the situation.