Brussels, 27/02/2013 (Agence Europe) - On 27 February, the European Commission banned the acquisition of Irish airline Aer Lingus by low-cost airline Ryanair, as it had hinted was likely earlier in the month (see EUROPE 10784). The Commission says the merger of the two biggest airlines in Ireland would have created a veritable monopoly on the 46 routes where they currently compete, which would have reduced choice for passengers and led to a price hike. It said that the corrective measures put forward by Ryanair (see EUROPE 10779) would not satisfactorily meet its concerns.
In this second rejection (following its initial refusal for similar reasons in 2007 of an earlier attempt by Ryanair to buy up Aer Lingus, see EUROPE 9456), the Commission noted the even greater weight of the two airlines today in terms of flights to and from Ireland. Their combined market share has gone from 80% in 2007 to 87% today, and the number of routes on which they compete has risen from 35 to 46. With the deal, Ryanair would have had effective monopoly on 28 routes and been subject to limited competition on a further 11 from a handful of charter airlines. It would have had a key advantage over the final 7 other competitors flying regular flights, because the latter send passenger to their own hub airports (Heathrow for British Airways, for example), whereas Ryanair and Aer Lingus, with their dominant position on the market, are the only ones to make point-to-point connections with Irish airports. The Commission's investigation confirmed the barriers to entry for new players due to the very powerful position of Ryanair and Air Lingus in Ireland. No new operators would be able to enter the market if the deal went ahead because it would be unable to compete and set up in Irish airports.
Ryanair suggested corrective measures (see EUROPE 10779) during the investigations, including selling off to Flybe the Aer Lingus business on the 43 routes operated by both Ryanair and Aer Lingus and selling off to IAG/British Airways the take-off and landing slots at London airports so IAG/British Airways would operate three routes (Dublin-London, Shannon-London and Cork-London). Flybe and IAG promised to run the routes for three years. The company also offered to sell further slots between London and Ireland.
The Commission said these measures were insufficient because of the scale of the competition problems the deal would generate. It says that Flybe would not be able to compete to a sufficient extent for the merged body and it appears unlikely that it would be able to run the 43 routes because it does not have enough cash in its coffers to compensate for any losses and does not have enough experience in managing a big company and network. IAG/British Airways would not have put enough constraints on the merged company and would have had little incentive to continue to run the three routes once the three years are up. Moreover, it is feared that the measures proposed could not be introduced fast enough, be properly operational or last for long enough. (FG/transl.fl)