Ryanair's dream to be grounded: Watchdog poised to order Michael O'Leary to halve carrier's stake in Aer Lingus

Michael O'Leary, the outspoken Ryanair boss who has harboured dreams of owning Aer Lingus, will be told this week to sell around half of the budget airline's stake in Ireland's national flag carrier.

Ryanair has long pursued Aer Lingus, and has a 29.8 per cent shareholding, worth about £210m. However, attempts by Mr O'Leary, pictured, have been knocked back three times at European level, most recently in February, while the Competition Commission (CC) is due to issue its initial findings into whether holding such a significant minority stake in a rival distorts the airline market.

As the two carriers dominate UK-Ireland routes, it is believed the CC will demand that Ryanair must sell down about 15 per cent in Aer Lingus, to prevent it having undue influence.

This follows the precedent set with BSkyB and the CC's order to reduce its stake in ITV from 17.9 per cent to 7.5 per cent at a loss of nearly £350m three years ago.

The Office of Fair Trading, which referred the issue to the CC for investigation, said last year that there was a good chance that the stake "may give it [Ryanair] the ability to exercise material influence over the commercial policy" of Aer Lingus. Christoph Mueller, Aer Lingus's chief executive, has been clear that he would like Ryanair off the shareholder register.

The Irish government owns a quarter of Aer Lingus, and voiced concerns about Ryanair's interest in the carrier during evidence to the Commission that was published last month.

A summary of the hearing stated: "Ryanair had diverted Aer Lingus's management attention towards fending off Ryanair's takeover bids rather than focusing on development and growth of the company... There was no intention of selling the Government's stake to Ryanair because of the concern over monopoly provision and connectivity to and from Ireland."

Last month, Ryanair failed in its attempts to put an end to the Commission's investigation after lodging an appeal with the Supreme Court.

Mr O'Leary called the probe "spurious and time-wasting" as Ryanair had held the stake for six-and-a-half years. Etihad Airways also owns a 3 per cent slice of Aer Lingus.

Mr O'Leary had already been spitting blood over the EU regulator's latest finding, which he claimed was "politically motivated" and "inexplicable", given the economic need for consolidation among European airlines. Ryanair had promised to sell off a number of routes upon buying Aer Lingus outright, with British Airways owner IAG willing to operate routes between the Emerald Isle and Gatwick. However, the EU argued that the deal would still mean passengers would pay more for their flights.

The Commission will issue its final report in July. Ryanair, Aer Lingus and the Commission all declined to comment.