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Ryanair says Brussels to block Aer Lingus takeover bid

An airplane of the Irish low-cost airline Ryanair takes off from Barcelona's airport on September 01, 2010. Irish no-frills airline Ryanair said on Tuesday that the European Commission intends to block its takeover bid for rival carrier Aer Lingus on grounds of unfair competition.

Irish no-frills airline Ryanair said Tuesday that the European Commission would block its takeover bid for rival carrier Aer Lingus on grounds of unfair competition, adding it would appeal against the decision.

"Ryanair...was notified this (Tuesday) morning at a state-of-play meeting with the EU Commission, that the EU Commission intends to prohibit Ryanair's offer for Aer Lingus, despite the fact that Ryanair has met every competition concern raised in the EU's statement of objections and during the review process," it said in a statement.

Aer Lingus added separately that it had not received any official notification but argued that the Ryanair bid should never have been made. It added that Ryanair's first attempt was also prohibited on competition grounds in 2007.

"Aer Lingus is a much stronger airline today than it was at the time of the previous Ryanair offers and is Ryanair's only significant competitor on the vast majority of Irish air routes," it said.

Ryanair had revealed last month that it had submitted "a radical and unprecedented remedies package to the EU in support of its offer for Aer Lingus."

"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," Ryanair spokesman Robin Kiely said.

"This decision is clearly a political one to meet the narrow, vested interests of the Irish government and is not based on competition law," he added.

Ryanair owns 30 percent of Aer Lingus and last July offered to buy the Irish government's stake in the airline, but Dublin has stood firm and last month formally announced that it would not sell.

The Irish government owns 25.1 percent of Aer Lingus -- not enough to single-handedly block Ryanair's offer, while the European Commission fears that a takeover would diminish competition for Irish consumers.

Recent media reports said Ryanair had offered to offload more than a third of Aer Lingus' short-haul operations to secure the takeover.

The Financial Times had said that Ryanair would dispose of 23 routes where a takeover would create a monopoly -- to British rival low-cost airline Flybe.

The business daily added that Ryanair had proposed to give British Airways the right to purchase about half of Aer Lingus' slots at London Heathrow airport that are used to fly services to Ireland.

Flybe had agreed to establish a new Irish subsidiary, Flybe Ireland, with 100 million euros of capital provided by Ryanair to allay concerns that a Ryanair takeover would lead to a monopoly of the Irish aviation industry. "For the first time in EU airline history, Ryanair delivered not one, but two, substantial upfront EU airline buyers who have agreed to come to Ireland to compete against a combined Ryanair/Aer Lingus," Ryanair added in Tuesday's statement.

Ireland's transport minister Leo Varadkar reiterated Dublin's opposition to the takeover earlier on Tuesday.

"As I have stated before, the Ryanair remedies package as reported has not satisfied the Government's concerns about connectivity, competition or employment," he added in a statement.

"I do not wish to make further comment until the European Commission has formally made its decision."

In early afternoon deals on the Dublin stock market, Aer Lingus shares fell by 4.33 percent to 1.28 euros. Ryanair shares were relatively unchanged at 5.65 euros.

An EC spokesman said the commission will take its decision at the end of the month or early March. Last month, the EC extended the deadline on its decision until March 6.