Ryanair bid for Aer Lingus blocked by EU but O'Leary plans to appeal

Ryanair's controversial £1bn bid for its rival Aer Lingus was blocked yesterday by EU watchdogs, who claimed it would reduce competition and force up fares.

The EU commissioner Neelie Kroes said the two airlines would control more than 80 per cent of European flights to and from Dublin airport, with a monopoly on 22 routes and a 60 per cent plus market share on 13 others. Other airlines would be unlikely to consider competing against such a dominant carrier, especially in view of Ryanair's record of aggressive retaliation against competitors.

"Any monopoly, even if advertised as low cost and low fare, is bad for consumers. The reality is that prices are higher and quality is lower when there is no competition," said Ms Kroes.

The Ryanair boss Michael O'Leary, who had lambasted the EU on Tuesday, immediately announced an appeal.

But Aer Lingus chairman John Sharman said: "Consumer choice is at the core of every competitive market and the creation of one dominant player out of Ireland, despite the protestations of Ryanair, just cannot be in the interests of consumers."

Mr O'Leary dismissed the objections, claiming Aer Lingus passengers will continue to "suffer high prices, unnecessary fuel surcharges, poor punctuality, and repeated strikes".

He is confident of winning his appeal to the European Court of First Instance. "This is the first time the Commission has prohibited a merger between two companies which combined will have less than 5 per cent of the EU market," Mr O'Leary said.

"This prohibition leaves Aer Lingus exposed as a small, peripheral, loss-making regional airline which cannot compete with Ryanair on price or punctuality from Dublin at a time when the rest of the European industry is consolidating."

Ryanair built up a 25 per cent stake in Aer Lingus before launching its bid last December. A similar stake is held by the Irish government.

Mr O'Leary claims Aer Lingus has wasted shareholders' money by opposing a bid worth €2.80 (£1.87) a share when the current price has fallen back to below €2.60.