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EU Commission Blocks Ryanair's Bid for Aer Lingus

By Reuters

The European Commission on Wednesday blocked an attempt by Ryanair to acquire rival Irish carrier Aer Lingus, marking only the second merger prohibition by the EU executive in four years.

The Commission, confirming a Reuters report from May 30, decided the combination would destroy competition at Dublin Airport where Ryanair, Europe's biggest budget airline, and Aer Lingus are based.

"The acquisition would have combined the two leading airlines operating from Ireland which currently compete vigorously against each other," the European Union's top competition watchdog said in a statement.

"The Commission concluded that the merger would have harmed consumers by removing this competition and creating a monopoly or a dominant position on 35 routes operated by both parties."

Ryanair Chief Executive Michael O'Leary had said before the decision that he expected the Commission to reject the bid and planned to appeal.

Ryanair's offer, originally valued at 1.48 billion euros ($2 billion), becomes only the 20th prohibition among more than 3,000 cases reviewed by the European Union executive since 1990.

In some ways, Aer Lingus owes its own success to Ryanair.

Ryanair's cut-rate prices and expanding choice of destinations have forced Aer Lingus to transform from a staid, high-priced Irish flag carrier into a tough no-frills competitor ready to match O'Leary ticket for ticket and route for route.

In a confidential charge sheet earlier this year, the Commission had laid out a tough case against the merger.

The robustness of the charge sheet will be important once the decision is appealed to the EU's Court of First Instance, which in past cases has scrutinised the fairness of such claims.

The charge sheet, known as a statement of objections, said that in the past six years the number of routes on which the carriers competed had jumped to 37 from eight, driving prices down by 5 to 8%.

Ryanair offered proposals it said could assure competition despite a merger, but they were never enough to satisfy the Commission. For example, the carrier offered to make space for a new rival to base as many as six planes at Dublin Airport.

Ryanair also offered to sell Aer Lingus' slots at London's Heathrow and Dublin for flights between the two airports.

Ryanair owns 25% of Aer Lingus, and O'Leary had said he intended to keep that if the merger was turned down. The Commission, though, has laid the legal groundwork possibly to force the divestiture of some or all of that stock.

The Commission would need a separate procedure to force Ryanair to sell its 25%. As matters stand, Ryanair has veto power over some decisions by the rival carrier, a situation the Commission could label anti-competitive.