Ryanair should be made sell Aer Lingus stake, says Government
It is the latest twist in a more than three-month saga where IAG has been trying to persuade the Government that it should sell its 25.1pc shareholding in Aer Lingus and approve the takeover of the airline.
In a letter from a senior Department of Transport civil servant, Ethna Brogan, to the CMA, she said the watchdog should not be swayed from its previously stated position that Ryanair must be forced to cut its Aer Lingus stake from nearly 30pc to no more than 5pc.
The CMA's predecessor, the Competition Commission, ordered Ryanair in 2013 to reduce its Aer Lingus holding, citing competition concerns. The watchdog also claimed that because Ryanair was such a big shareholder in Aer Lingus, it was likely to deter other airlines from making a bid to buy Aer Lingus.
Ryanair has claimed the fact that IAG has now made an approach to buy Aer Lingus negates a fundamental plank of the CMA decision to make it cut its stake in its smaller rival.
But the Department of Transport said it agrees with the original finding and that it should still stand.
"The department considers that the IAG proposal confirms that merger and acquisition opportunities exist for Aer Lingus but that it also confirms that interest in acquiring Aer Lingus is contingent on Ryanair exiting Aer Lingus' share register," Ms Brogan said in her letter to the CMA.
She added: "I can confirm that it remains the position of the Government that it is unlikely to sell its shareholding in Aer Lingus while Ryanair continues to be a significant minority shareholder."
"The department considers that the CMA should...proceed with the remedial action," she concluded.
The CMA is proposing that a trustee will be appointed to oversee the sale of the bulk of Ryanair's holding in Aer Lingus.
IAG has asked the CMA that it instead give Ryanair permission to sell the entire Aer Lingus holding to IAG.
Aer Lingus has claimed Ryanair's efforts to have the CMA's decision reviewed is based on a "wilful misinterpretation and misrepresentation" of the facts.
Ryanair has insisted it has strong grounds for not being forced to reduce its Aer Lingus stake.
Meanwhile, Richard Branson's Virgin Atlantic has still not submitted any letter to the European Commission detailing its concerns regarding the proposed Aer Lingus takeover.
The airline wrote to Fianna Fáil transport spokesman Timmy Dooley last week detailing its concerns and claimed that significant remedies would need to be enacted to protect consumers if the deal proceeds.
A spokeswoman for Virgin Atlantic told the Irish Independent that the letter was intended to be private and declined to comment further on it.
She said that Virgin Atlantic will submit its letter to the Commission soon.
The Commission declined to say whether it has received any submissions from other airlines concerned about the planned Aer Lingus takeover.
"The proposed transaction has not been notified to the European Commission," said spokesman Ricardo Cardoso.
It is understood that neither Emirates nor Etihad have expressed any concerns regarding the planned Aer Lingus takeover to the Government or the European Commission. Etihad owns 4.9pc of Aer Lingus.