Ryanair 2009 Annual Report Download - page 104

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The EU Commissioner for Competition, Neelie Kroes, said on June 27, 2007 that, “Since Ryanair is
not in a position to exert de jure or de facto control over Aer Lingus, the European Commission is not in a
position to require Ryanair to divest its minority shareholding, which is, by the way, not a controlling stake.” In
October 2007, the European Commission also reached a formal decision that it would not force Ryanair to sell
its shares in Aer Lingus. However, Aer Lingus appealed this decision before the CFI and the CFI may overturn
the decision. This case was heard in July 2009 and a decision is expected to be issued approximately nine
months thereafter. In addition to the risk that the CFI may overturn the decision, the EU legislation may change
in the future so as to require such a forced disposition. In January 2008, the CFI heard an application by Aer
Lingus for interim measures limiting Ryanair’s voting rights, pending a decision of the CFI on Aer Lingus’
appeal of the European Commission’s decision not to force Ryanair to sell the Aer Lingus shares. In March
2008, the court dismissed Aer Lingus’ application for interim measures. If eventually forced to dispose of its
stake in Aer Lingus, Ryanair could suffer significant losses due to the negative impact on attainable prices of the
forced sale of such a significant portion of Aer Lingus’ shares.
On December 1, 2008, Ryanair made a new offer to acquire all of the ordinary shares of Aer Lingus it
did not own at a price of €1.40 per ordinary share. Ryanair offered to keep Aer Lingus as a separate company,
maintain the Aer Lingus brand, and retain its Heathrow slots and connectivity. Ryanair also proposed to double
Aer Lingus’ short-haul fleet from 33 to 66 aircraft and to create 1,000 associated new jobs over a five-year
period. If the offer had been accepted, the Irish government would have received over €180 million in cash. The
employee share option trust and employees who own 18% of Aer Lingus would have received over €137 million
in cash. The Company met Aer Lingus management, representatives of the employee share option trust and
other parties. The offer of €1.40 per share represented a premium of approximately 25% over the closing price
of €1.12 of Aer Lingus on November 28, 2008. Ryanair also advised the market that it would not proceed to
seek EU approval for the new bid unless the shareholders agreed to sell their stakes in Aer Lingus to Ryanair.
However, as the Company was unable to secure the shareholders’s support it decided, on January 28, 2009, to
withdraw its new offer for Aer Lingus.
Legal Actions Against Regulated Monopoly Airports. Ryanair is involved in a number of legal and
regulatory actions against the Dublin and London (Stansted) airports for what Ryanair considers to be ongoing
abuses of their dominant positions in the Dublin and London Stansted markets. Management believes that both
of these airports have been engaged in “regulatory gaming” in order to achieve inflated airport charges under the
regulatory processes in the U.K. and Ireland. By inflating its so-called “regulated asset base” (essentially the
value of its airport facilities), a regulated airport can achieve higher returns on its assets through inflated airport
charges. With respect to London (Stansted), the OFT, following complaints from Ryanair and other airlines, has
recognized that the regulatory process is flawed and provides perverse incentives to regulated airports to spend
excessively on infrastructure in order to inflate their airport charges. The OFT referred the case to the U.K.
Competition Commission, which released its preliminary findings in April 2008. It found that the common
ownership by BAA of the three main airports in London affects competition and that the “light touch” approach
by the Civil Aviation Authority was having an adverse impact on competition. In March 2009, the Competition
Commission published its final report on the BAA and ordered the breakup of BAA, (which will involve the
sale of London (Gatwick) and London (Stansted) and either Glasgow or Edinburgh Airport in Scotland). In May
2009, BAA appealed the Competition Commission’s decision on the bases of bias and lack of proportionality.
Ryanair has secured the right to intervene in this appeal in support of the Competition Commission, and the case
is expected to be heard in October 2009.