Ryanair told to reduce its stake in Aer Lingus

Budget airline Ryanair has been forced to reduce its 29.8% stake in Irish carrier Aer Lingus by the Competition and Markets Authority (CMA).

Two years ago the Competition Commission, the CMA’s predecessor, ruled that the airline would have to reduce its stake down 5% after International Airlines Group, the owner of British Airways, approached Aer Lingus with a €1.4bn (£1bn) takeover offer.

The Competition Commission justified its decision by saying that Ryanair’s stake in Ireland’s flagship carrier could prevent another company from taking over the airline.

Ryanair chief executive Michael O’Leary had asked the regulator to review the original decision, claiming the two years since the original decision represented a “material change of circumstances”.

However, on Friday, the CMA said it had provisionally decided to uphold the decision.

"Our provisional view is that the circumstances around IAG’s proposed bid are consistent with the findings in our report," said Simon Polito, who chairs the CMA panel on the Ryanair stake.

The CMA added that if actions were not taken to reduce the budget carrier’s stake in Aer Lingus, “Ryanair would remain a significant hurdle to any merger”.

Ryanair contested the CMA’s ruling, describing it as “manifestly wrong”, saying it highlighted that only basis for the CMA’s original divestment ruling was unsubstantiated.

“The recent offers by IAG for Aer Lingus totally disprove and undermine the bogus theories and unsubstantiated evidence on which the CMA’s final report was based,” spokesman Robin Kiely said.

Meanwhile, the government and IAG remain divided over a key issue in the talks on the possible sale of Aer Lingus.

IAG has tabled a €1.36bn offer for the Irish carrier and has been discussing the terms under which the government would sell the State’s 25.1% stake with senior officials since late February.

As of 15:49 on Friday, Ryanair shares were down 1.96% to €10.98, while Aer Lingus shares were down 0.74% to €2.35.