Ryanair CEO Call Decision "Unlawful," Vows Legal Action

After a seven month investigation, EU Commission regulators ruled Wednesday to prohibit budget airline Ryanair from taking over its Irish rival, Aer Lingus.

Neelie Kroes, European Commissioner for Competition Policy, told reporters at a press conference such a deal would have limited competition as the combined airlines would have controlled more than 80 percent of all European flights to and from the Dublin Airport.

Kroes said the decision was made to "safeguard consumers" and the Commission "does not prohibit takeovers lightly."

"But in this case, the Commission had no alternative because this takeover would have led to dramatically reduced choice for consumers and, as a result, the likelihood of lower quality and higher fares," said Kroes.

"This would have been unacceptable for the fourteen million passengers currently flying on 35 routes to and from Ireland. As an island, Ireland depends heavily on air transport: the harm of this takeover to consumers would therefore have been significant."

The Board of Aer Lingus said it welcomed the EU Commission's prohibition decision.

"Today's prohibition decision, following the EU Commission's exhaustive investigation, is good news for Aer Lingus and for our customers. Consumer choice is at the core of every competitive market and the creation of one dominant player out of Ireland, despite the protestations of Ryanair, just cannot be in the interests of consumers," said Aer Lingus Chairman John Sharman.

"Aer Lingus has made tremendous strides over a relatively short time in successfully executing our strategy and that work will continue apace. We are determined to deliver on our excellent prospects as an independent company and I'd like to thank our staff for their continued commitment,"

As ANN reported, when Ryanair announced its offer last October, the Aer Lingus Board advised shareholders to reject the offer on the basis that it ignored the company's prospects as an independent company and that it was anti-competitive.

Ryanair was not pleased with the decision.

"The European Commission's decision to prohibit this merger between two EU airlines which between them represent just 5 percent of European airline traffic is not just unprecedented, but in our view unlawful," said Ryanair's Chief Executive, Michael O'Leary.

"We call on the Commission to explain how it can rubber stamp mergers between larger airlines such as Air France/KLM, Lufthansa/Swiss and Lufthansa/Austrian, when these airlines have bigger positions at their home airports than the combined Ryanair/Aer Lingus share at Dublin Airport. 

When Air France, which has over 60 percent share of aircraft movements at Paris CDG, is allowed by the Commission (with minimal remedies) to acquire KLM which has over 60 percent share of movements at Schipol, it is untenable that the Commission now changes these rules, to prohibit a Ryanair/Aer Lingus merger which will result in a similar 60 percent share of movements at only one airport Dublin which is currently doubling its capacity.

Whereas the Air France/KLM merger, resulted in significant fare increases, Ryanair has offered unprecedented remedies which includes…guaranteed fare and fuel surcharge reductions. It is obvious that the Commission is applying a unique and unprecedented set of rules in the Ryanair/Aer Lingus case," he said.

Ryanair said it will appeal the decision to the European Court of First Instance and seek to have it overturned.

The carrier currently owns 25 percent of Aer Lingus.

"The Court has overturned several Commission prohibitions and we expect the Court will do so again in this case. European consumers should not be denied the lower fare and fuel surcharge savings which will follow from a Ryanair/Aer Lingus merger," O'Leary said.

FMI: www.europa.eu, www.aerlingus.com, www.ryanair.com