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Ryanair loses court battle over Aer Lingus

Aviation news: EU court blocks Aer Lingus takeover by Ryanair

Mike Gordon and Peppi Kiviniemi  Jul 06, 2010

LUXEMBOURG - Irish low-cost airline Ryanair Holdings PLC Tuesday lost its court battle with the European Commission over whether it can take over rival Aer Lingus Group PLC.

The European Union's General Court ruled that the European Commission had been right to block the takeover bid by Ryanair for the former state-run carrier.

The court also upheld a commission ruling that Ryanair doesn't have to divest its minority shareholding in Aer Lingus.

The court said that the dominant positions that would have been created on certain routes as a result of the merger were sufficient grounds for the commission to have blocked the deal.

The General Court also upheld the commission's refusal to order Ryanair to divest its minority shareholding in Aer Lingus, as the holding doesn't confer control of the company, the court said in a statement. Following the privatization of Aer Lingus in 2006, Ryanair launched a takeover attempt, which was blocked by the European Union's antitrust authorities on the grounds that it would reduce competition in Ireland to an unacceptable level.

Despite the failed bid, Ryanair was left holding a sizable minority stake in its Irish rival, which today stands at 29.8%, close to the threshold where it would be legally obliged to launch an offer for the entire capital.

Ryanair Chief Executive Michael O'Leary said Tuesday the carrier has no immediate plans to make a third offer for Aer Lingus, "which in any event would be unlikely to succeed unless the Irish government decides to sell its 25% stake." However, he said the ruling doesn't prevent Ryanair from making another offer, either.

"The long term financial viability of Aer Lingus can only be secured as part of one strong Irish airline group, particularly when the rest of Europe's airlines are consolidating to three main flag carriers, lead by Air France, British Airways and Lufthansa and two large low fares carriers, Ryanair and easyJet," he added.

While Ryanair complained to the court about the commission decision not to be allowed to go through with its takeover plans, Aer Lingus pleaded about Ryanair's 29.8% holding, saying it gave Ryanair too much control over the airline's business plans.

Aer Lingus said in a statement that it may appeal the decision to the European Court of Justice, but would first consider the judgment on Ryanair's stake in the airline "in detail."

"It's regrettable that the court has not taken this opportunity to take the further step necessary to address the anti-competitive effects of Ryanair's minority shareholding in Aer Lingus," Chairman Colm Barrington said. He nevertheless welcomed the decision to block Ryanair's takeover.

The decision "confirms that [a] takeover of Aer Lingus by Ryanair would harm consumers and lead to higher prices on Irish routes."

The commission welcomed the court's backing, noting especially how it had validated the commission's practice of analyzing the impact of airline mergers on a route-by-route basis.

"The combination of Ryanair and Aer Lingus would have created a dominant position on 35 routes to the detriment of more than 14 million E.U. passengers that travel to and from Ireland each year," the competition commissioner Joaquin Almunia said in a statement.

Aviation news: EU court blocks Aer Lingus takeover by Ryanair
Ryanair CEO Michael O'Leary / Image via

Source: Dow Jones Newswires

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