Ryanair may be forced to reduce its stake in Irish airline Aer Lingus, the Competition Commission has said.
The CC, which has been investigating the impact of Ryanair’s 29.8 per cent stake in Aer Lingus, is concerned that the shareholding could be reducing competition on UK to Ireland routes.
It said that it had provisionally decided that the shareholding gives "Ryanair the ability to influence the commercial policy and strategy of Aer Lingus".
The commission could force Ryanair to sell all or part of its shareholding in Aer Lingus as well as introducing other "safeguards". It will submit its full report on the issue on July 11.
Ryanair, which failed in its third attempt to take over Aer Lingus earlier this year, condemned the CC’s verdict as an "unfounded claim" and added that European Commission had concluded that competition between the two airlines had "intensified" since 2007.
But the CC said that Ryanair’s shareholding "obstructs Aer Lingus' ability to merge or combine with another airline to build scale and achieve synergies to remain competitive".
CC deputy chairman Simon Polito, who is chairman of the Ryanair/Aer Lingus inquiry group, said: "Our provisional view is that Ryanair’s shareholding is likely to weaken its main competitor on routes between Great Britain and the Republic of Ireland.
"Whilst not giving it control over the day-to-day running of its rival, Ryanair’s minority shareholding can influence the major strategic decisions that could be crucial to Aer Lingus’s future as a competitive airline on these and other routes.
"We were particularly concerned about Ryanair’s influence over Aer Lingus’s ability to be acquired by, merge with, or acquire another airline. We thought it likely that such a combination would be necessary to increase Aer Lingus’s scale and achieve synergies to allow it to remain competitive in future."
Aer Lingus welcomed the CC announcement and said it would continue to "assist the investigation into the anti-competitive effects of Ryanair's minority shareholding".
Ryanair said that it would appeal any decision by the CC to force it to reduce the stake in Aer Lingus. The airline is already appealing against the EC’s decision to block its latest attempt to take over Aer Lingus in February.
Chief executive Michael O'Leary said: "This provisional decision by the UK CC is bizarre and manifestly wrong.
"The CC's finding that Ryanair's shareholding obstructs Aer Lingus' ability to attract other airlines was disproved by Etihad's purchase of a 3 per cent stake and the evidence submitted by other large EU airlines, which confirmed that Ryanair's shareholding was not a barrier to other airlines acquiring a stake in Aer Lingus."
Report by Rob Gill