The UK Competition Commission recently concluded that Ryanair’s 29.82% stake in Aer Lingus gives it the ability to influence the commercial policy and strategy of Aer Lingus. The UK Commission acknowledged that Aer Lingus and Ryanair had remained competitive since the acquisition of the minority stake in 2006, but said that without Ryanair’s shareholding, competition between the airlines on routes between Great Britain and Ireland might have been more intense.
The UK Commission provisionally found that Ryanair’s shareholding:
- Obstructs Aer Lingus’s ability to merge with another airline
- Allows Ryanair to block special resolutions by Aer Lingus thus hindering its plans to issue shares and raise capital
- Could prevent Aer Lingus from disposing of some of its valuable slots at Heathrow Airport
The UK Commission issued a notice of possible remedies including:
- Full divestiture of Ryanair’s shareholding in Aer Lingus, removing any ownership link between Ryanair and Aer Lingus
- Partial divestiture of Ryanair’s shareholding in Aer Lingus to a level which would, for example, give Ryanair an effective voting power of below 25%
- Behavioural remedies to accompany a partial divestiture that might include measures such as the restriction to acquire further shares in the future
In response, Aer Lingus and the Irish Government submitted that only a full divestiture of Ryanair’s shareholding would suffice. Ryanair submitted that a forced divestment would be disproportionate, noting it would incur significant loss if it was required to sell the shares quickly.
A final decision is expected by the end of August. If the UK Commission maintains its position as set out in the provisional findings, Ryanair will likely appeal to the UK Competition Appeals Tribunal and thereafter to the UK Court of Appeal if necessary.
Interestingly, Ryanair’s recent challenge to the validity of the Commission’s investigation into its Aer Lingus shareholding was rejected by the UK Supreme Court.