Ryanair has been told that it must reduce its stake in Irish rival Aer Lingus from 29.8 per cent to 5 per cent.
The UK’s Competition Commission made its ruling today (August 28) when it said that Ryanair’s minority shareholding in Aer Lingus reduced competition between the airlines on routes between the UK and Ireland.
Ryanair immediately said it would appeal against the commission’s decision with chief executive Michael O’Leary branding the verdict “bizarre and manifestly wrong”.
The final decision by the CC was widely expected after its provisional findings were published in May and found that Ryanair had the “ability to influence the commercial policy and strategy of Aer Lingus”.
Simon Polito, CC deputy chairman and chairman of the Ryanair/Aer Lingus Inquiry Group, said: "In light of the comments received in response to our provisional findings and in line with our usual practice, we have reviewed further all the evidence that we received.
"After careful consideration we confirmed our provisional view that Ryanair’s minority shareholding has resulted, or may be expected to result, in a substantial lessening of competition between the airlines.
"We consider that there is a tension between Ryanair’s position as a competitor and its position as Aer Lingus’s largest shareholder, and that Ryanair has an incentive to weaken its rival’s effectiveness as a competitor."
Polito added that Ryanair had offered several concessions but eventually the commission had decided that a reduction in Ryanair's shareholding to 5 per cent would be the best solution.
Ryanair called the CC's claims "baseless" and pointed to a European Commission rulilng in February that competition had "intensfied" between the two Irish carriers since 2007.
O'Leary said the CC process was a "corrupt and politically biased charade" and claimed that the commission had ignored a "substantial body of evidence that conclusively disproves their case".
"While Ryanair is one of the UK's largest airlines, Aer Lingus has a tiny presence in the UK, serving just six routes to the Republic of Ireland, a traffic base that has declined over the past three years and now accounts for less than 1 per cent of all UK air traffic," added O'Leary.
"This case, involving two Irish airlines where one (Aer Lingus) accounts for less than 1 per cent of the UK's total air traffic and concerns very few UK consumers, is yet another enormous waste of UK taxpayer resources from a body which took no action whatsoever when the two main UK airlines (BA and Bmi) merged. It would appear to be a case of one rule for the UK airlines but an invented set of rules for two Irish airlines."
Aer Lingus said it welcomed the CC’s decision that Ryanair’s shareholding was anti-competitive and should be reduced to 5 per cent.
Chairman Colm Barrington said: “It was unacceptable that our principal competitor was allowed to remain on our share register with a shareholding of 29.82 per cent and interfere with our business despite the European Commission blocking both Ryanair's first hostile takeover attempt six years ago and its most recent hostile takeover attempt earlier this year.”
Ryanair's appeal will be to the UK's Competition Appeal Tribunal. But even if it loses this case, the airline can launch further appeals which may last several years, as with the case of Stansted where the then owner BAA spent more than three years in a series of protracted appeals against the decision by the Competition Commission that it must sell the airport. The CC first ordered the sale of Stansted in March 2009 and BAA only conceeded defeat in its battle to keep the airport in August 2012.