EU rejects Ryanair's third takeover bid for Aer Lingus

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The European Commission has rejected Ryanair's third attempted takeover of Irish flag carrier Aer Lingus, insisting that the low-cost carrier's remedy packages failed to fully address its competition concerns.

An earlier 'statement of objections' by the Commission had outlined a series of problems with the proposed merger. Its doubts centred on 46 crossover routes for which a combined Ryanair-Aer Lingus would command monopolies or near-monopolies.

Insisting that the merger "would have most likely led to higher fares", Joaquín Almunia, Commission vice-president in charge of competition policy, says Ryanair's remedies were "simply inadequate" to allay the EU's concerns.

The Commission found fault with both of the up-front buyers to whom Ryanair had agreed to transfer crossover routes. Ryanair's remedy packages involved a divestment of 43 routes to Flybe, as well as slot transfers to IAG on three Ireland-London routes.

"After an in-depth assessment, the Commission found that at least some of the routes [earmarked for Flybe] - for example, longer leisure routes - do not correspond to Flybe's current business model," it says. "The Commission also noted that, due to the lack of experience with this type of aircraft, Flybe would have faced a challenge in operating Airbus A320."

The EU's executive body further criticises the agreement that Ryanair had negotiated with IAG - a three-year transferral of 70 weekly frequencies on the Dublin-London route and 14 weekly frequencies on each of the Cork-Shannon and Shannon-London routes.

It concludes that IAG would likely "have exited the three routes or significantly scaled back its operations" after the commitment period expired. Furthermore, the Commission says that even during the initial three years IAG would not have mitigated the dominant market share enjoyed by Ryanair-Aer Lingus on Ireland-London routes.

"The merged entity would have remained dominant in terms of numbers of frequencies and seat capacity on these routes," it notes, adding: "IAG has a different business model focusing more on business and connecting passengers."

Ryanair has reacted by accusing the EU of taking a "political" decision which is not "based on a fair and reasonable application of EU competition rules". The low-cost carrier will now appeal the decision in EU courts, according to spokesman Robin Kiely.

Aer Lingus says it "welcomes" the prohibition decision. The airline believes the attempted takeover was a smokescreen designed to confound an investigation by the UK Competition Commission (CC) into the effects of Ryanair's 29.8% holding in the Irish flag carrier.

It notes: "The UK CC investigation began following the referral by the UK's Office of Fair Trading on 15 June 2012, which observed that 'there is a realistic prospect that its stake has resulted or will result in a substantial lessening of competition'. The announcement of Ryanair's bid on 19 June, just four days later, was clearly motivated by a desire to derail the UK CC's investigation."