EU TO BLOCK A LINGUS TAKEOVER
Ryanair Holdings PLC
26 June 2007
EU COMMISSION TO BLOCK AER LINGUS TAKEOVER
EUROPEAN CONSUMERS DENIED €100m P.A. IN LOWER FARES BY THE EU
Ryanair, Europe's largest low fares airline today (Tuesday 26 June) held a Press
Conference in Brussels to respond to the recent European Commission leaks
indicating that Ryanair's offer for Aer Lingus will be prohibited. Ryanair
expects this prohibition decision to be announced by DG Competition over the
coming week.
Ryanair condemned this prohibition decision on a number of grounds as follows:
1. This prohibition reverses 20 years of EU airline consolidation which has
seen the Commission approve all other mergers between larger competitors
including Air France/KLM, Lufthansa/Swiss and Lufthansa/Austrian, all with
minimal remedies.
2. This prohibition is unjustified in the case of two airlines which between
them account for less than 5% of the EU air travel market.
3. The decision is politically motivated, designed to appease the narrow
interests of the Irish Government, which was the only party (other than Aer
Lingus itself) to object to the merger.
4. This decision is bad for consumers, because it allows Aer Lingus to continue
to increase its fares and levy unjustified fuel surcharges, both of which
would have been reduced/eliminated had the Ryanair merger succeeded.
5. The decision is manifestly erroneous as it applys a citypair analysis (e.g.
claiming that Aer Lingus flights to Heathrow and Charles de Gaulle compete
with Ryanair flights to Stansted and Beauvais) when every other EU airline
merger precedents have applied an airport pair analysis (under which rules
typically Heathrow and Charles de Gaulle would be deemed to be separate
markets from Stansted and Beauvais respectively).
6. The decision is manifestly in error since it is based on the Commission's
inaccurate claim that there are barriers to entry at Dublin Airport, when
the case file evidence clearly proves that there are no barriers to entry at
Dublin Airport.
7. The decision inaccurately claims that other competitors would not enter
Dublin Airport, when the case file proves that other competitors have
confirmed they will enter Dublin Airport.
8. The decision is based on applying a 'base' competition concept which has no
precedent and is a misapplication of 25 year old US cases.
9. The Commission wrongly claims that Aer Lingus has a record of entering
routes where Ryanair operates. In fact the opposite is the case. Aer Lingus
has withdrawn from over 20 Ryanair routes in the past 7 years.
The decision ignores the substantial consumer benefits of over €100m p.a.
guaranteed by Ryanair's remedies package which included:
1. Reducing Aer Lingus's short-haul fares by 10% p.a. (saving consumers over
€70m p.a.).
2. Immediately eliminating Aer Lingus's fuel surcharges (saving consumers over
€30m p.a.).
3. Transferring Heathrow slots to BA and Air France, who will each base
aircraft in Dublin.
4. Transferring Dublin slots to other competitors, as long as they based
between 6 to 10 new aircraft in Dublin (a total of over 2,800 weekly slots).
This prohibition will make further European airline consolidation more difficult
to proceed including for example the rumoured takeover of Alitalia by Air One,
and the rumoured acquisition of Iberia by a British Airways led consortium. At a
time when European airlines are facing renewed competition from American mega
carriers under EU-US Open Skies, this prohibition reverses the Commission's 20
year policy of encouraging EU airline consolidation, denies Aer Lingus
passengers a guarantee of lower fares and zero fuel surcharges, and shows the
Commission's lack of impartiality or balance in cases which conflict with the
narrow vested interests of national governments.
Speaking at today's press conference in Brussels, Ryanair's Chief Executive,
Michael O'Leary said:
'The European Commission's decision to prohibit this merger between two EU
airlines which between them represent just 5% of European airline traffic is
not just unprecedented, but in our view unlawful.
'We call on the Commission to explain how it can rubber stamp mergers
between larger airlines such as Air France/KLM, Lufthansa/Swiss and
Lufthansa/Austrian, when these airlines have bigger positions at their home
airports than the combined Ryanair/Aer Lingus share at Dublin Airport. When
Air France which has over 60% share of aircraft movements at Paris CDG is
allowed by the Commission (with minimal remedies) to acquire KLM which has
over 60% share of movements at Schipol, it is untenable that the Commission
now changes these rules, to prohibit a Ryanair/Aer Lingus merger which will
result in a similar 60% share of movements at only one airport Dublin which
is currently doubling its capacity. Whereas the Air France/KLM merger,
resulted in significant fare increases, Ryanair has offered unprecedented
remedies which include over €100m p.a. of guaranteed fare and fuel surcharge
reductions. It is obvious that the Commission is applying a unique and
unprecedented set of rules in the Ryanair/Aer Lingus case.
'The Commission's case as set out in its Statement of Objections is
materially inaccurate. There were over 100 material errors and, inaccuracies
in the Commission's SO. The Commission has already admitted that its own
econometric analysis was inaccurate by a factor of 100. Many of the
Commission's claims (which were transposed verbatim from the false claims
made by the Irish Department of Transport and Aer Lingus) are factually
untrue.
'Air Berlin recently completed the acquisition of Deutsche BA and LTU in
Germany. Both of these takeovers were approved by the German Competition
Authority with minimal remedies, despite the fact that they led to higher
fares and fuel surcharges for DBA and LTU passengers. Similarly Flybe has
recently acquired BA Connect from British Airways under a merger whereby
British Airways acquired a 15% stake in Flybe, the UK's second largest low
fares airline. Yet again the UK Office of Fair Trading approved this merger
with very minimal remedies. It is surprising that the only airline merger in
Europe over the past 20 years which has been prohibited is this proposed
Ryanair/Aer Lingus takeover. The only difference with this merger is the
opposition of the Irish Government and one can only conclude that the
European Commission's decision to prohibit is a political one to appease the
Irish Government rather than advance the interests of Aer Lingus's consumers
and European competitiveness generally.
Ryanair, which currently owns just 25% of Aer Lingus, will appeal this
prohibition to the European Court of First Instance, and seek to have it
overturned. The Court has overturned several Commission prohibitions and we
expect the Court will do so again in this case. European consumers should
not be denied the lower fare and fuel surcharge savings which will follow
from a Ryanair/Aer Lingus merger. Ryanair calls on the European Commission
to explain how it can rubber stamp Air France's and Lufthansa's
acquisitions, as well as all other EU airline mergers over the past 20
years, yet now prohibit a merger between two Irish airlines which combined
account for less than 5% of EU airline traffic. We are confident that the
European Courts will overturn this bizarre, illogical, manifestly inaccurate
and untenable prohibition.
Ryanair also confirmed that it will oppose any attempt by the European
Commission to require it to dispose of its stake in Aer Lingus. Ryanair
highlighted that it owns just 25% of Aer Lingus, and has no control over Aer
Lingus which remains controlled and run by the Irish Government and its
trade unions. Ryanair highlighted that in recent months it has called upon
Aer Lingus to lower its airfares - yet Aer Lingus has raised them. Ryanair
has also called on Aer Lingus to remove its unjustified fuel surcharges -
yet again Aer Lingus has since raised them. The fact that Aer Lingus's share
price has now fallen to €2.50, some 30 cents below the Ryanair offer of
€2.80 per share suggests that the Board and management of Aer Lingus are
putting the interests of its major shareholder, the Irish Government, over
the interests of other Aer Lingus shareholders who should be entitled to
accept Ryanair's offer and this is a very worrying development for ordinary
Aer Lingus shareholders.
Aer Lingus fares last year were more than twice those of Ryanair, and
rising. Aer Lingus passengers continue to suffer high fuel surcharges
whereas Ryanair guarantees 'no fuel surcharges'. With this decision, Aer
Lingus' high fares and fuel surcharges will continue. Aer Lingus' passengers
should send the bill for their higher fares and fuel surcharges to the
European Commission, rue de la Loi 200, Brussels!'.
Ends. Tuesday 26th June, 2007
For further information please contact:
Pauline McAlester, Murray Consultants
Tel. +353-1-4980300 or
Mob. +353-87-2558300
Editor's Note:
Finally, Ryanair welcomed the confirmation of the EU Ombudsman that he will
investigate a series of leaks by the EU Commission in this case and its
failure to take any action against Aer Lingus for leaking/publishing details
of Ryanair's confidential remedies to the markets.
This information is provided by RNS
The company news service from the London Stock Exchange
Latest directors dealings
- 19 hours ago Savannah Energy
- 20 hours ago Buccaneer Energy PLC
- 20 hours ago Savannah Energy
- 21 hours ago Carclo
- 21 hours ago Schroder Japan Growth Fund