Ryanair's Aer Lingus takeover plans have hit the buffers after the EU Commission reveals it intends to prohibit Ryanair's acquisition offer.
This is Ryanair's third attempt at a takeover of its Irish rival, and it's fair to say the rejection has come as a surprise to chief executive Michael O'Leary.
On 28 January, O'Leary issued a bullish statement saying he was confident this attempt would be successful, saying he was looking forward to "completing our offer for Aer Lingus, subject to receiving approval from the EU competition authorities in early March".
Earlier this month, Flybe also has boosted Ryanair's hopes of a takeover of Aer Lingus by agreeing to a plan to fly 43 of the Irish carrier's short-haul routes.
But the various offers made by Ryanair to persuade the European Commission that its planned 694 million euro (£596.7 million) takeover of Aer Lingus will not harm competition for Irish passengers now appears to have failed.
In a statement, Ryanair said it had met every competition concern raised in the EU's Statement of Objections and during the review process, including providing the EU – at its request – with irrevocable commitments from not one, but two, upfront buyers to eliminate all competitive overlaps between Ryanair and Aer Lingus.
O'Leary's airline intends to appeal the decision. It said in a statement: "IAG has committed that they would take over divestments of Ryanair's and Aer Lingus's entire London-Gatwick operations, and Flybe has committed to take over 43 Aer Lingus UK and European routes.
"Given that the EU Commission recently approved IAG's acquisition of BMI at London-Heathrow on the basis of three year commitments, the EU's claim that it could not be satisfied of IAG's and Flybe's commitments to these Irish routes after three years is another example of the EU holding Ryanair to a much higher standard than any other EU airline."
New press officer Robin Kiely added: "It appears clear from this morning's meeting, that no matter what remedies Ryanair offered, we were not going to get a fair hearing and were going to be prohibited regardless of competition rules.
"Given Ryanair's remedies package clearly addresses every issue raised in the EU's Statement of Objections, any decision to prohibit would be manifestly unfair and in contravention of EU competition rules.
"Ryanair has no alternative but to appeal any prohibition decision and we expect to get a fair hearing at the European Courts, as we haven’t received one from Commissioner Almunia and his case team. This decision is clearly a political one to meet the narrow, vested interests of the Irish government and is not based on competition law."
Aer Lingus was never going to take a takeover lying down - it has repeatedly fought against the deal, and earlier this month predicted it would fail, adding that it's jump in profits in 2012 proved the airline could stand on its own.
"It seems to me so far fetched, this proposition, that we don't bother wasting our time on it," Aer Lingus chief executive Christoph Mueller told journalists in a conference call.
"We question very much that Flybe will be an independent competitor to Ryanair and we are working from the assumption that we will be around next year when we talk at Aer Lingus's 2013 results announcement," he said.
Mueller was speaking after Aer Lingus announced operating profit of 69.1m euros, up 40% from last year. That was slightly above a consensus forecast of 66.1m euros by seven analysts polled by Reuters.
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