November 11, 2012 7:25 pm

Ryanair’s Aer Lingus remedies rejected

The EU is to serve formal objections against Ryanair’s third proposed takeover of Aer Lingus, after Europe’s largest low-cost carrier by revenues failed to offer concessions that address all Brussels’ competition concerns about the deal.

The European Commission has made it clear that it will reject what Michael O’Leary, Ryanair’s chief executive, described as a “radical” and “unprecedented” remedies package to secure regulatory approval.

According to people involved in the talks, Ryanair has been told that the remedies package falls short of what is required to eliminate competition concerns on all routes where the merged Irish carrier would enjoy a dominant position.

Although Ryanair said last week it had found airlines willing to provide competition on routes that would otherwise be dominated by the merged Irish carrier, the commission concluded the offer was so unsatisfactory it has not asked rival airlines to comment on the details – the usual step in assessing significant concessions.

The issuance of a so-called “statement of objections” by the commission will take Ryanair one step closer to its bid being blocked for the second time.

In 2007, the commission prohibited Ryanair’s first tilt at Aer Lingus on the grounds it would harm consumers by creating a near monopoly on some 35 routes to and from Ireland.

Ryanair can improve its offer to the commission at any time. After formal objections are issued, it will have an opportunity to challenge the findings and hold a hearing on the deal.

A commission spokesperson declined to comment.

People involved with the talks insist the commission is keeping an open mind and ensuring Ryanair has every chance to prove the bid for Aer Lingus can pass the competition test, not least because officials want to ensure the decision is legally watertight.

The provisional deadline for a commission decision is early February. It is extremely rare for the commission to prohibit mergers and it has never before approved a takeover that is resubmitted.

Michael O’Leary, Ryanair’s chief executive, said he had received “no feedback” from the commission but added he believed Brussels would find it “very difficult” to reject the proposed remedies package.

He said there were six airlines willing to provide competition on routes where Ryanair and Aer Lingus overlap, although he did not identify them.

British Airways and Flybe are believed to be considering the case for operating services on routes where the Irish carriers overlap.

Willie Walsh, chief executive of IAG, British Airways’ parent, confirmed the company had held discussions with Mr O’Leary, adding: “If there was some benefit to us in dialogue with Ryanair – in the event they are successful [with the Aer Lingus bid] – we certainly will do that.”

Jim French, Flybe’s chief executive, declined to comment.

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