Last summer, the General Court rejected Ryanair’s appeal against the European Commission’s 2007 decision to prohibit its proposed acquisition of Aer Lingus.  The proposed acquisition of Aer Lingus by Ryanair was notified to the European Commission under the EU Merger Regulation in late October 2006.

The Commission decided that the relevant market constituted flights between city pairs (as opposed to specific airport pairs). On each of the city pairs on which both Ryanair and Aer Lingus overlapped, the Commission found that the airlines were each other’s closest competitor and that the proposed transaction would give rise to a monopoly or a very significant combined market share. The Commission also found that the acquisition would remove potential competition on the city pairs where only one of the airlines was active. Accordingly, in June 2007, the Commission prohibited the transaction. Ryanair appealed the Commission’s decision to the EU General Court.

The Court noted the differing cost structures and the customer service advantages offered by Aer Lingus but found that, nevertheless, its operating costs place it in the category of ‘low-cost’ airlines. The Court also found that the fact that both airlines have maintenance and crew based at Dublin airport gave Ryanair and Aer Lingus an economic advantage over carriers with bases at other airports. The Court agreed with the Commission’s route-by-route analysis and noted that charter airlines that offer a minimal amount of ‘seat-only’ fares on the key routes provided little or no competition to either airline.

The Court also agreed with the Commission’s finding of significant barriers to entry on routes operated by Ryanair and Aer Lingus to and from Ireland such as local brand recognition. Consequently, the Court ruled that it was highly unlikely that third parties would have the incentive or ability to compete on the relevant routes. The Court also upheld the Commission’s view that the commitments submitted by Ryanair (e.g. making slots available) had formal and substantive shortcomings, making them insufficient to remedy the competition concerns.

The Court thus upheld the Commission’s decision prohibiting the acquisition.

Contributed by Cormac Little.