U.K. Competition Commission Says Holdings Must Be Reduced To 5 Percent

The U.K. Competition Commission says Ryanair Holdings plc (Ryanair) will be required to sell its 29.8 per cent stake in Aer Lingus Group plc (Aer Lingus) down to 5 per cent. This will be accompanied by obligations on Ryanair not to seek or accept board representation or acquire further shares.

In its final report published Wednesday, the CC confirmed its provisional findings that Ryanair’s minority shareholding had led or may be expected to lead to a substantial lessening of competition between the airlines on routes between Great Britain and Ireland.

The importance of scale to airlines is clear from evidence of widespread industry consolidation in recent years. Against that background, the CC formed the view that Aer Lingus’s commercial policy and strategy was likely to be affected by Ryanair’s minority shareholding, in particular because it was likely to impede or prevent Aer Lingus from being acquired by, or combining with another airline.

The CC was also concerned that Ryanair’s minority shareholding was likely to affect Aer Lingus’s commercial policy and strategy by allowing Ryanair to block special resolutions, restricting Aer Lingus’s ability to issue shares and raise capital and to limit Aer Lingus’s ability to manage effectively its portfolio of Heathrow slots. Ryanair’s shareholding also increased the likelihood of Ryanair mounting further bids for Aer Lingus, with the associated disruption to Aer Lingus’s ability to implement its commercial strategy.

"In light of the comments received in response to our provisional findings and in line with our usual practice, we have reviewed further all the evidence that we received," said Simon Polito, CC Deputy Chairman and Chairman of the Ryanair/Aer Lingus Inquiry Group. "After careful consideration we confirmed our provisional view that Ryanair’s minority shareholding has resulted, or may be expected to result, in a substantial lessening of competition between the airlines.

"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. 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."

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