Just when Ryanair thought that its shareholding in Aer Lingus was no longer a problem for regulatory authorities, the UK's Office of Fair Trading (OFT) announced that it had begun an investigation. It wants to determine whether Ryanair's near 30 per cent stake gives it “material influence” over Aer Linguss commercial policy and thereby restricts competition.
The first part of the OFT’s investigation however will be to determine whether it has jurisdiction over the matter.
Ryanair's response to the decision was characteristically confrontational. Its chief executive, Michael O'Leary, proclaimed the OFT move to be “out of time and unnecessary”. On the other hand, Aer Lingus welcomed the move and said it would co-operate fully with the investigation. As ever, the two airlines differ. Mr O'Leary pointed out that the European Court had already made a decision on the issue. Actually though, what the court determined was that Ryanair's stake did not give it “decisive influence” which may not be the same thing. Terminological differences such as this are meat and drink to lawyers who, in the end, may be the only winners to emerge from the investigation.
The reality is that Aer Lingus is influenced by Ryanair continually. Would Aer Lingus open up a service on a route already adequately serviced by Ryanair? Probably not. Does Aer Lingus imitate Ryanair's stance on extra charges to the point where flyers would see no difference between the two? It does not. Commercial rivalry can and does increase competition but not always.
However, if the OFT decides it is not satisfied that competition between the two airlines is all that it could be, it will refer the matter to the EU's Competition Authority. Then, one can expect Mr O'Leary's legal team to go into overdrive because it is possible that Ryanair could be forced to sell its shareholding. Recently, Mr O'Leary made it clear that he still wanted to get a controlling stake in Aer Lingus. This, he reckons, is more likely than ever because the Government can no longer justify retaining its 25 per cent shareholding, given its desperate need for money.
Selling the State’s shareholding in Aer Lingus would raise in the region of €150 million for the Government which is not a lot given the size of the exchequer shortfall. But if the Government is considering the sale of State-owned giants such as the ESB and Bord Gais, it would be difficult to defend retention of the Aer Lingus stake. It would also though be hard to find a buyer as long as Ryanair remains the largest shareholder.