FEB.27.2013 – Ryanair didn’t receive the approuval of the EC to take over the other irish company Aer lingus.

The European Commission has prohibited, on the basis of the EU Merger Regulation, the proposed takeover of the Irish flag carrier Aer Lingus by the low-cost airline Ryanair. The acquisition would have combined the two leading airlines operating from Ireland. The Commission concluded that the merger would have harmed consumers by creating a monopoly or a dominant position on 46 routes where, currently, Aer Lingus and Ryanair compete vigorously against each other. This would have reduced choice and, most likely, would have led to price increases for consumers travelling on these routes. During the investigation, Ryanair offered remedies. The Commission assessed them thoroughly and carried out several market tests. However the remedies proposed fell short of addressing the competition concerns raised by the Commission.

Commission Vice President in charge of competition policy Joaquín Almunia said: “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. For them, the acquisition of Aer Lingus by Ryanair would have most likely led to higher fares. During the procedure, Ryanair had many opportunities to offer remedies and to improve them. However, those proposals were simply inadequate to solve the very serious competition problems which this acquisition would have created on no less than 46 routes.”

Ryanair and Aer Lingus are by far the most important carriers operating out of Ireland. They compete directly on 46 routes. It was the third time that the proposed acquisition of Aer Lingus by Ryanair was notified to the Commission. In 2007 the Commission prohibited Ryanair’s first attempt to acquire Aer Lingus and this decision was upheld by the EU General Court . In 2009, the second notification by Ryanair was withdrawn.

Changes in market 

The Commission took into account the changes in market circumstances since 2007, for example the fact that the market positions of Ryanair and Aer Lingus have become even stronger, with their combined market shares going up from 80% in 2007 to 87% in 2012 for short-haul flights out of Dublin. The number of routes to and from Ireland operated in competition by Ryanair and Aer Lingus has increased from 35 in 2007 to 46 in 2012. The combination of Ryanair and Aer Lingus would have led to very high market shares on all of these 46 routes:

The proposed merger would therefore have removed the currently vibrant competition between Ryanair and Aer Lingus on all these routes where their activities overlap. Moreover, the Commission’s investigation confirmed the existence of high barriers to entry stemming, in particular, from Ryanair’s and Aer Lingus’ strong market positions in Ireland. The 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.

In short, customers’ travelling options would have been substantially reduced and it is unlikely that competitors would have been able to sufficiently constrain the merged entity in its market behaviour. Higher prices for passengers would have been the likely outcome.

Remedies proposed by Ryanair

Ryanair offered several sets of remedies during the procedure. The final remedy package consisted mainly of the divestiture of Aer Lingus’ operations on 43 overlap routes to Flybe and the cession of take-off and landing slots to IAG/British Airways at London airports, so that IAG/British Airways would operate on 3 routes (Dublin-London, Shannon-London, and Cork-London). Flybe and IAG committed to operate the routes for 3 years. Additional slot divestitures on London-Ireland routes were also offered.

However, the Commission’s investigation demonstrated that these remedies were insufficient to ensure that customers would not be harmed, taking into account the scope and magnitude of the competition concerns raised by the proposed transaction on the 46 routes. In particular, the Commission found that Flybe was not a suitable purchaser capable of competing sufficiently with the Ryanair/Aer Lingus merged entity. The investigation also showed that IAG/British Airways would not constrain the merged entity to a sufficient degree and would have little incentive to stay on the routes beyond a 3 year period. In addition, the Commission could not conclude with the requisite degree of certainty that the proposed commitments could actually be put in place in a timely manner. Nor was it certain that they would work in practice and for a sustained period of time.

During the investigation, the Commission gathered views from a large number of market participants in Ireland and internationally, including competitors, customers, travel agents, consumer associations, public authorities and airport operators. The Commission carried out such market tests on Ryanair’s successive remedy proposals three times.