Ryanair in Aer Lingus stake warning

The tails of Aer Lingus and Ryanair planesLow-cost airline Ryanair could be forced to sell-down its stake in rival Aer Lingus after the competition watchdog said it potentially distorted the market for flights between Ireland and Britain.

The UK's Competition Commission said in provisional findings that Ryanair's 29.8%shareholding in Aer Lingus was likely to "weaken its main competitor" and could hold it back from remaining competitive by threatening to block any merger or acquisition deals with other airlines.
Ryanair boss Michael O'Leary vowed to appeal any final decision that it will have to reduce its stake in Aer Lingus, claiming the initial findings were "bizarre and manifestly wrong".

The commission is considering whether Ryanair, which has held a stake in Aer Lingus for six-and-a-half years, should cut its holding to below 25% to reduce its influence on the Irish rival and is seeking views on appropriate levels.
Simon Polito, deputy chairman of the Competition Commission and chairman of the inquiry group, said: "We recognise that there has been competition between Aer Lingus and Ryanair since 2006. However, without Ryanair's minority shareholding, competition might have been more intense and may be restricted in the future.

"Passengers on routes between Great Britain and Ireland will benefit from Aer Lingus continuing to compete vigorously with Ryanair and so Aer Lingus needs to be free to take any actions that will strengthen its position in the future."

The commission is particularly concerned that Ryanair could prevent Aer Lingus from joining forces with other airlines to increase its scale and competitiveness, while also potentially blocking moves to raise capital from shareholders or selling valuable takeoff and landing slots at Heathrow.

Mr Polito added: "Whilst not giving it control over the day-to-day running of its rival, Ryanair's minority shareholding can influence the major strategic decisions that could be crucial to Aer Lingus's future as a competitive airline on these and other routes."

Aer Lingus said it "looks forward to continuing to assist the UK Competition Commission in its investigation".

The Competition Commission is expected to publish its final report by July 11.
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