Travel News Today

The European Commission, in a highly unusual move, is expected to reject Ryanair's proposed purchase of rival Irish airline Aer Lingus, sources familiar with the situation said on Wednesday.

The prohibition of Ryanair's unsolicited offer, originally valued at EUR1.48 billion euros (USD$2 billion), will be only the 20th in more than 3,000 cases reviewed by the European Union's executive arm since 1990, and the first since 2004.

The competition department prepared a proposed decision to present to the full Commission before a July 4 deadline, after a market test found Ryanair's latest proposed remedies for competition problems were insufficient.

Ryanair Chief Executive Michael O'Leary has said he would challenge the Commission in court if the deal were turned down. The decision runs to more than 300 pages in an effort to deal with issues that may end up in court, one of the sources said.

Commission competition spokesman Jonathan Todd declined comment on the investigation until a final decision is taken.

The EU regulator said in a confidential charge sheet known as a statement of objections in March that it was concerned about the deal's impact on competition, especially at Dublin Airport.

It noted Aer Lingus, the Irish flag carrier, and Ryanair, an insurgent no-frills airline, were head-to-head rivals and the number of routes on which they competed had risen to 37 from eight over the past six years, driving prices down 5 to 8 percent.

Ryanair, whose bid lapsed automatically when the Commission launched an in-depth investigation of the deal in December, said in a confidential offer it would make space for a new rival to base as many as six planes at Dublin Airport.

It also offered to sell Aer Lingus' slots at London's Heathrow and Dublin for flights between the two airports.

The Commission considered that would not solve the problem.

Even if the Commission had approved the Ryanair deal there would have been problems because the Irish government, which holds 25 percent of Aer Lingus, opposed the transaction. So did several other stockholders.

Ryanair's O'Leary has been commenting on the proposed deal throughout the bidding process.

At one point he said the company would consider a second bid for Aer Lingus if Ryanair received a favorable outcome from the EU review and the Irish takeover panel. But he had also said he expected the deal to be blocked.

Once the deal is blocked, the European Commission may not be finished with Ryanair. It has laid the legal groundwork to force Ryanair to sell some or all of its one-quarter holding in Aer Lingus. O'Leary has said he intends to keep the 25 percent.

(Reuters)