SPEECH - Introductory remarks on Merger Ryanair / Aer Lingus
European Commission - SPEECH/13/164 27/02/2013
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Vice President of the European Commission responsible for Competition Policy
Introductory remarks on Merger Ryanair / Aer Lingus
Press conference- Press room
Brussels, 27 February 2013
Today the Commission has decided to block the acquisition of Aer Lingus, the Irish flag carrier, by the low-cost airline Ryanair. This transaction would have combined the two leading airlines operating from Ireland. Currently these two airlines are competing head to head.
I reached the conclusion that this acquisition could not be allowed. Indeed it would have directly harmed passengers, who would have had to pay higher fares as a result.
In 2007 the Commission prohibited for the first time such an attempt. Our decision was later upheld by the EU General Court, who rejected Ryanair's appeal.
In 2009, Ryanair notified the acquisition to the Commission but then decided to withdraw it. So this is the second time that the Commission had the opportunity to assess such a transaction in depth.
Of course when the deal was notified we carried out an entirely new investigation, looking at the present circumstances. The market positions of the two companies on flights to and from Ireland are even stronger today than they were in 2007.
The number of air transport routes where Aer Lingus and Ryanair compete directly against each other also increased from 35 to 46.
On these 46 routes we found that the acquisition raised very significant competition concerns, since it would have eliminated Ryanair's strongest competitor. These routes cover flights to and from Dublin, Cork, Knock and Shannon, which are used by more than 11 million passengers each year.
On 28 of these routes the merger would have simply led to a monopoly.
On the other routes the only competitive constraint would have been exercised by airlines with a different business model, such as charter airlines or large airlines that focus on connecting flights, and this constraint would have been too weak.
In the end, the most likely outcome of this transaction would have been quite simple: when flying to and from Ireland, passengers wouldn't have been able to choose between as many options as they can today, and they would have ended up paying higher fares.
Ryanair made some proposals to try to remedy these concerns.
We studied them with great care and we carried out as many as three successive market tests, gathering views from competitors, customers, travel agents, consumer associations, public authorities and airport operators.
In the end, the outcome of our analysis was very clear: these remedies were not sufficient given the seriousness of the competition problems at stake.
Ryanair proposed to divest a stand-alone business comprising most of Aer Lingus' present operations on 43 routes where its activities overlap with Ryanair. This business would have been given to Flybe, along with capital.
However, we were not convinced that Flybe would have the experience and the ability to maintain and develop this business as a viable and active force, capable of competing with Ryanair. It is unlikely that Flybe would have operated these routes on a lasting basis.
On 3 routes between Irish airports and London, Ryanair proposed to lease slots to London Gatwick for 3 years to British Airways.
However this remedy was not sufficient to address the creation of a dominant position on these routes. In addition, it could not be excluded that British Airways would have exited the 3 routes or scaled back its operations at the end of the 3 year period.
All in all, while Ryanair did make proposals covering each of the relevant routes, these proposals did not alleviate our concerns, because they fell short of addressing the fundamental problem posed by this transaction: the creation of a monopoly or a dominant position on these 46 routes.
In fact, remedying problems of such magnitude would have required a countervailing force capable to be a strong and viable competitor to Ryanair - precisely the kind of competitor that Aer Lingus is today.
So I had no alternative than to propose to the college of commissioners to prohibit this acquisition. This was required to protect the millions of European citizens who travel to and from Ireland - in particular Irish citizens who depend heavily on air transport when they travel abroad.
In recent years there has been some consolidation in the air transport sector in Europe. I welcome such consolidation. Let me add a caveat, however: consolidation is welcome so long as it does not occur at the expense of competition, or – and this amounts to the same – at the expense of consumers.
Looking at the last ten years, the Commission has approved many mergers in the sector. Let me just name a few recent decisions: Iberia/British Airways, Lufthansa/Austrian Airlines, or even more recently the acquisition of bmi by IAG, which was conditionally approved based on remedies involving the divestment of slots.
In today's decision we have followed exactly the same approach as we did in all these previous cases. Since 2004 we looked at 15 other mergers and this is now the third prohibition. Apart from the first attempt by Ryanair to acquire Aer Lingus, the Commission also prohibited the merger between Olympic and Aegean Airlines in 2011.
Observers may notice that in these 3 prohibition cases, the airlines that were merging had large bases at the same "home" airport. Indeed such situations may raise more significant competition concerns than in other scenarios.
Our decision today preserves the healthy competition between airlines that passengers need on the many routes on which both airlines compete. For the citizens who will travel on these flights in the coming years, it has a direct positive impact: they will continue enjoying from the benefits of competition between Ryanair and AerLingus and accordingly, they will continue benefitting from better choice of services and also lower fares.