Department asks that Ryanair be ordered to sell Aer Lingus stake
Last month, the British watchdog said in a preliminary finding that Ryanair exerted "material influence" over Aer Lingus via its near 30pc holding in its smaller rival.
The Commission is now deciding on remedies to eradicate that influence and is due to report next month. It's almost certain to tell Ryanair to cut its stake in Aer Lingus, or even sell it in its entirety.
"The Department of Transport, Tourism and Sport considers that only full divestiture of Ryanair's shareholding in Aer Lingus would be effective in addressing the substantial lessening of competition that has been identified by the Commission in its provisional findings," civil servant Ethna Brogan has told investigators at the UK watchdog. Ms Brogan is a principal officer at the Department's Aviation Services division.
Ms Brogan has told the Commission that Ryanair has twice been prevented by the European Commission from pursuing bids for Aer Lingus.
"Given that its ultimate stated objective of acquiring control of the company is not capable of being fulfilled, the department considers that there is no valid reason for Ryanair to retain its shareholding," she said in a letter to the Commission.
"Against this backdrop, it is likely that the retention of the shareholding (and the launch of further public bids) could damage Aer Lingus's commercial policy and strategy and thereby reduce its effectiveness as a competitor in the UK-Ireland market," she added.
"The department considers that anything short of full divestment would be likely to have a significant detrimental impact on Aer Lingus's ability to be acquired by, or merge with, another airline and make it more difficult for Aer Lingus to attract a strategic minority shareholder," Ms Brogan said.
Aer Lingus, in which the Government has a 25.1pc stake, has told the Commission that Ryanair's shares in the company shouldn't be sold to one single investor and instead returned to a "diverse public holding".
Ryanair has told the UK Competition Commission that its findings are flawed. It will also appeal any ruling ordering it to reduce its Aer Lingus stake.