Ryanair warns of Aer Lingus break-up if merger fails

DUBLIN Fri Sep 21, 2012 6:21am EDT

Ryanair crew stand in front of a passenger jet on the tarmac of Marignane airport in Marseille in this May 10, 2006 file photo. REUTERS/Jean-Paul Pelissier/Files

Ryanair crew stand in front of a passenger jet on the tarmac of Marignane airport in Marseille in this May 10, 2006 file photo.

Credit: Reuters/Jean-Paul Pelissier/Files

DUBLIN (Reuters) - Ryanair (RYA.I) warned on Friday that Aer Lingus (AERL.I) would likely be broken up if the European Commission blocks the bid by Europe's largest budget carrier to take over its smaller Irish rival.

The commission, which acts as the European Union's anti-monopoly watchdog, is due to rule by January whether Ryanair's third attempt to take over Aer Lingus would restrict competition.

Chief Executive Michael O'Leary said Ryanair had received approaches by financial institutions to buy its 30 percent in Aer Lingus and said it may sell it if the commission rejects a package of remedies to address its competition concerns.

He declined to give details of the approaches.

"If the commission turns down this remedies package, then I think we would then have to seriously consider exiting our investment in Aer Lingus, which will without question result in Aer Lingus being broken up," O'Leary told journalists on the sidelines of the company's annual shareholders' meeting.

The remedies package includes commitments by more than one airline to compete on routes where Ryanair and Aer Lingus currently have no competitors.

The commission will talk to the airlines in question before Ryanair submits its final remedies package, O'Leary said.

"They have said that they want to take up the packages of the routes and flights and traffic that we have laid on the table. None of them can formally commit until they sit down and discuss it with the European Commission," he said.

The package would see "multiple airlines" starting new routes to Irish airports in Cork, Shannon, Dublin and Knock.

O'Leary declined to name the airlines, but a source familiar with the matter has told Reuters the company was talking to British Airways (ICAG.L) and Virgin Atlantic VA.UL about taking over some routes.

Aer Lingus has said it expected the commission to reject the bid as the number of routes on which the two airlines compete was higher than when the Commission rejected an earlier bid.

The Irish government has said it is interested in selling its 25 percent stake in Aer Lingus.

(Reporting by Lorraine Turner and Conor Humphries; Editing by David Holmes)

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