European Regulators Block Ryanair’s Latest Attempt to Buy Aer Lingus

European Regulators Block Ryanair’s Latest Attempt to Buy Aer Lingus

BRUSSELS — The European Commission on Wednesday blocked the third attempt by Ryanair to take over Aer Lingus, saying the tie-up of the two Irish airlines would damage competition and raise prices on air routes to Ireland.

The decision was widely expected after Ryanair — the largest budget carrier in Europe — said earlier that the commission would prohibit the deal, worth about 700 million euros or $ 900 million.

“The Commission’s decision protects more than 11 million Irish and European passengers who travel each year to and from Dublin, Cork, Knock and Shannon,” the European Union competition commissioner, Joaquín Almunia, said in a statement before a news conference.

Proposals made by Ryanair “were simply inadequate to solve the very serious competition problems which this acquisition would have created on no less than 46 routes,” Mr. Almunia said.

Shares of Ryanair were down 6 euro cents to 5.60 euros by early afternoon in Dublin; Aer Lingus stock was up 1 cent at 1.25 euros.

On Wednesday, Aer Lingus, which had rejected Ryanair’s offers, said that it welcomed the commission decision. Ryanair, which owns about 30 percent of Aer Lingus, reiterated that it would appeal the decision to the European Court of Justice.

Ryanair accused Mr. Almunia of protecting Aer Lingus, the Irish flag carrier, against a takeover by an upstart. The company also contends that the regulator applied a double standard because he approved the takeover by British Airways and Iberia of British Midland International last year under a simplified procedure.

“We regret that this prohibition is manifestly motivated by narrow political interests rather than competition concerns and we believe that we have strong grounds for appealing and overturning this politically inspired prohibition,” said Robin Kiely, a spokesman for Ryanair.

Prolonged litigation could have wider ramifications, making it more difficult for the Irish government to sell its 25 percent stake in Aer Lingus. Ireland agreed to sell that stake under the terms of an international bailout finalized in November 2010, although that agreement did not set a deadline for the sale.

The deal is the fourth Mr. Almunia has blocked since he took over the role of the region’s antitrust chief in February 2010. Earlier this year, the regulator thwarted U.P.S.‘s attempt to buy TNT Express.

The decision on Wednesday marks the latest chapter in years of acrimony between the commission and Ryanair’s pugnacious chief executive, Michael O’Leary, who has repeatedly criticized commission officials for decisions that curtailed his ambitions.

The enmity between Mr. O’Leary and the commission developed early last decade when the two sides began a running battle over whether Ryanair received illegal state subsidies that enabled the airline to open up routes to regional airports. Those airports were often some distance from major transport hubs, but still close enough to lure passengers away from more established carriers.

Last year, the commission announced new investigations into the effect of discounts Ryanair had received at the Lübeck-Blankensee airport in Germany and the Klagenfurt regional airport in Austria.

Mr. O’Leary has sharply criticized the commission for failing to do more to save money by booking its officials on low-cost airlines like his own. Ryanair also has said its arrangements with all E.U. airports comply with the bloc’s competition rules.

The E.U. competition authority blocked Ryanair’s first bid for Aer Lingus in 2007 on the grounds that the combined airline would have had a monopoly on too many routes. Back then, Mr. O’Leary accused the commission of bowing to political pressure from the Irish government, which opposed the deal. The airline abandoned a second attempt in 2009 because of opposition from the Irish government.

On Wednesday, Ryanair accused the commission of holding it to a higher standard than other airlines seeking mergers after it had offered ‘‘historic and unprecedented’’ concessions.

Among them: allowing two competitor airlines to serve Dublin, Cork and Shannon; giving those airlines more than half of the short-distance business that currently belongs to Aer Lingus; and agreeing to transfer airport slots in Britain to allow British Airways to serve Ireland from both Gatwick and Heathrow. Ryanair also had offered Flybe, a competitor, 100 million euros in funding to make it “a commercially profitable and viable entity” in Ireland.

On Wednesday, the commission spelled out the reasons behind its decision.

It said that both Ryanair and Aer Lingus had strengthened their positions in the Irish market since the commission refused the previous deal in 2007, and that the merger would have created an ‘‘outright monopoly’’ on 28 short-distance routes serving Ireland. The commission also said that there were such high barriers to entry to the Irish market that any new competitors would face too many challenges.

The commission’s “market investigation showed that there was no prospect that any new carrier would enter the Irish market after the merger, in particular by the creation of a base at the relevant Irish airports, and challenge the new entity on a sufficient scale,” it said in a statement. “Higher prices for passengers would have been the likely outcome,”


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