EU Regulators Kill Irish Airline Merger

(CN) - The European Commission blocked discount airline Ryanair's takeover of Aer Lingus, saying the merger would create a monopoly in Irish skies.

Ryanair's proposed acquisition of Aer Lingus - Ireland's two leading airlines - would harm consumers by creating a dominant position on 46 routes where the two now compete against each other, the commission said in a statement.

On 28 of those routes, the merger would have created an outright monopoly while on 11 others the competition is restricted to charter carriers.

Regulators found that the two airlines compete with scheduled carriers on only seven of the 46 routes. And because competition tends to focus on bringing connecting passengers to their own hubs, rather than the point-to-point connections that Ryanair and Aer Lingus offer, the two Irish airlines are each other's biggest competition for those routes.

"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," said Commission Vice President in charge of competition Joaquin Almunia. "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 offered to divest Aer Lingus operations on 43 overlap routes to Flybe Airlines and give takeoff and landing slots to British Airways at London airports. Both Flybe and British Airways committed to operate the routes for three years, but the concessions weren't enough for the European regulators.

"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," the commission concluded.

Ryanair is a low-fare carrier operating point-to-point and short-haul flights across Europe. Its fleet consists of 305 aircraft at 51 bases across the EU, including Dublin, London, Brussels and Milan.

Aer Lingus operates most of its flights out of its Dublin hub, and is partly owned by the Irish government and to a slightly larger degree by Ryanair.

The commission said U.K. regulators are reviewing the legality of Ryanair's nearly 30 percent ownership of Aer Lingus.

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