EU to decide on Ryanair bid for Aer Lingus shares in January

THE EUROPEAN Commission yesterday opened an in-depth phase-two review of Ryanair’s €1.30-a-share offer for Aer Lingus.

The commission now has 90 working days, until January 14th, to decide on whether the proposed transaction would significantly impede effective competition in Europe.

The commission’s decision to extend its investigation had been expected by both airlines and their advisers.

In a statement yesterday, the commission said its preliminary investigation into the proposed takeover indicated “potential competition concerns”, given that Ryanair and Aer Lingus are the main operators out of Dublin Airport.

“On a large number of European routes, mainly out of Ireland, the two airlines are each other’s closest competitors and barriers to entry appear to be high,” the commission added.

“Many of these routes are . . . only served by the two airlines. The takeover could therefore lead to the elimination of actual and potential competition on a large number of these routes.”

The commission’s phase-two investigation will seek to determine whether its initial concerns are “confirmed or not”.

The commission said yesterday that the opening of this in-depth inquiry did not “prejudge the result of the investigation”.

As a result of the commission’s decision, Ryanair’s offer for Aer Lingus actually lapses under Takeover Panel rules.

However, the airline said it intends to re-bid for Aer Lingus if the commission clears its offer.

This would require the consent of the Takeover Panel, which usually prohibits an entity from making a further offer for a public company here within 12 months of the date on which the original offer lapsed.

This is Ryanair’s third attempt to acquire Aer Lingus. In 2007, the commission blocked the proposed takeover on competition grounds.

In 2009, Ryanair withdrew an offer before it had been considered by the commission.

Since Ryanair’s offer on July 24th, Aer Lingus has twice urged its shareholders to reject the bid.

In a statement yesterday, Aer Lingus said the reasons for prohibition of the latest offer are “even stronger than before”, given that it is Ryanair’s only significant competitor on the vast majority of Irish air routes.

Ryanair declined to comment on the process yesterday. The Michael O’Leary-led airline has yet to submit its proposed remedies to the competition issues that arise from its offer for Aer Lingus but this is expected to happen as part of the commission’s in-depth investigation.

Earlier this week, it emerged that Ryanair had asked at least six other airlines to operate alternative services on some of the Aer Lingus routes. These are Air France-KLM, easyJet, Etihad Airways, Flybe, International Airlines Group and Virgin Atlantic.

It is understood that Ryanair received a lukewarm response from Etihad and easyJet.

In a circular to shareholders on July 31st about the Ryanair offer, Aer Lingus said 35 routes overlapped between the two airlines in 2007 but that this had increased to 50 routes in 2012.

In 2007, Aer Lingus and Ryanair were the only operators on 22 of these overlapping routes and this has doubled to 44 routes this year.

It said the combined market share on the routes where the airlines overlap is 90 per cent out of Dublin and 100 per cent in both Cork and Shannon airports.

The Aer Lingus share price closed marginally ahead at €1.078 in Dublin yesterday.