Aer Lingus Files Lawsuit vs. Top Shareholder Ryanair

Aer Lingus Group filed a lawsuit Monday in the European Union's second-highest court in hopes of forcing its main rival, budget airline Ryanair, to sell its shares in Aer Lingus.

Aer Lingus wants the European Court of First Instance to rule that the European Commission, the executive arm of the 27-nation bloc, has authority to order Ryanair to sell its 29.4 percent holding in Aer Lingus. The commission previously has said it cannot do this under existing competition laws.

In a statement, Aer Lingus said it also has asked the Luxembourg court, "as a matter of urgency, to make an order to prevent Ryanair from interfering in the running of Aer Lingus' business pending judgment on the appeal."

Ryanair had no immediate comment. Europe's no-frills leader previously has argued that, despite its investment, it has been unable to exercise any influence over Aer Lingus policy.

Ryanair quickly became the top shareholder in Aer Lingus after the Irish government privatized the previously state-owned airline in September 2006.

But Ryanair's attempt to seize its major Irish competitor failed because key shareholders -- chiefly the government and employee-controlled trusts -- oppose Ryanair and have ensured that the airline does not reach the minimum 50 percent holding for a takeover.

European Union competition authorities further undermined Ryanair's ambitions, ruling in June that a combined Aer Lingus-Ryanair operation would create an Irish monopoly.

Ryanair said the verdict as politically biased and at odds with previous EU approvals of airline mergers. It vowed to sue the EU to overturn the monopoly verdict and to retain its Aer Lingus holding until then.

Ryanair's rights as senior Aer Lingus shareholder are already the subject of a protracted dispute between the airlines.

Aer Lingus has refused two formal Ryanair demands for an extraordinary general meeting -- a right normally afforded under Irish corporate law to any investor with a minimum 10 percent holding. Aer Lingus argued that it would not take instructions from Ryanair because this would violate EU competition laws.

"It is our intention to deal with the presence of Ryanair on our shareholder register decisively through short-term interim measures, as well as seeking a speedy permanent resolution from the Court of First Instance," said Aer Lingus Chairman John Sharman. He declined to specify what interim measures he had in mind, besides continued refusal to convene an EGM.

Ryanair wanted shareholders to vote on reversing Aer Lingus' most controversial move since privatization: its imminent transfer of Heathrow Airport services from Ireland's major western airport, Shannon, to a new hub in the British territory of Northern Ireland.

Irish politicians and Aer Lingus employees widely oppose Aer Lingus' withdrawal of economically valuable links from Shannon. But the government of Prime Minister Bertie Ahern has dismissed pressure to intervene, arguing that Aer Lingus' commercial decisions should be respected.

On the Irish Stock Exchange, Aer Lingus shares held steady at 2.15 euros ($3.15) a share, while Ryanair fell 1.6 percent to 4.97 euros ($7.28) in trading Monday.