Ryanair is to appeal against the Competition Commission’s ruling today that it should cut its shareholding in Aer Lingus.
The UK competition authority called on the carrier to reduce its stake from 29.8% to 5%.
The Commission confirmed its provisional findings that Ryanair’s minority shareholding “had led or may be expected to lead to a substantial lessening of competition” between airlines on routes between the UK and Ireland.
Competition Commission deputy chairman Simon Polito, chairman of the Ryanair/Aer Lingus inquiry group, said: “In line with the recent decision of the European Commission prohibiting Ryanair from acquiring Aer Lingus, we recognise that Ryanair and Aer Lingus compete intensely for passengers travelling between Great Britain and Ireland, to the benefit of millions of passengers crossing the Irish Sea each year; and that competition between them is at least as intense now as it was when Ryanair first acquired its stake in Aer Lingus in 2006.
“However, we consider that there is a tension between Ryanair’s position as a competitor and its position as Aer Lingus’s largest shareholder, and that Ryanair has an incentive to weaken its rival’s effectiveness as a competitor.
“Ryanair’s minority shareholding affects Aer Lingus’s commercial policy and strategy in various ways that could be crucial to Aer Lingus’s future as a competitive airline.”
He added: “We were particularly concerned about Ryanair’s ability, either directly or indirectly, to impede Aer Lingus from combining with another airline to build scale and achieve synergies to remain competitive.
“Ryanair proposed various remedies to us in an attempt to address our specific concerns. In a dynamic and uncertain sector such as the airline industry, however, it is inherently difficult to design remedies that would cater for all eventualities.
“We concluded that the effective and proportionate remedy that would address our concerns was to require a partial divestment of Ryanair’s shareholding to 5%, facilitated by the appointment of a Divestiture Trustee.
“Aer Lingus would then be free to take actions to maintain and strengthen its competitive position in the future for the benefit of passengers on routes between Great Britain and Ireland.”
Ryanair pledged to appeal the ruling to the UK Competition Appeal Tribunal.
Chief executive Michael O’Leary described the ruling as “bizarre and manifestly wrong”.
He said: “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 3 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 and concerns very few UK consumers, is yet another enormous waste of UK taxpayer resources from a body which took no action whatsoever when the two main UK airlines (BA and Bmi) merged.
“It would appear to be a case of one rule for the UK airlines but an invented set of rules for two Irish airlines.”