European Commission Approves IAG Acquisition of Aer Lingus

In its ruling the Commission had concerns that the merged entity would have faced insufficient competition on several routes. The Commission also found that the merged entity would have prevented Aer Lingus from continuing to provide traffic to the long-haul flights of competing airlines on several routes and has requested the parties to address the Commission’s concerns on this matter.

The European Commission has cleared the proposed acquisition of Irish carrier Aer Lingus by International Consolidated Airlines Group (IAG), the parent of European carriers British Airways, Iberia and Vueling. However, the clearance remains conditional upon concessions relating to London Gatwick slots and the carriage of connecting passengers to other airlines.

In its ruling the Commission had concerns that the merged entity would have faced insufficient competition on several routes. The Commission also found that the merged entity would have prevented Aer Lingus from continuing to provide traffic to the long-haul flights of competing airlines on several routes and has requested the parties to address the Commission’s concerns on this matter.

European Commissioner in charge of competition policy Margrethe Vestager said: "By obtaining significant concessions from the airlines the Commission has ensured that air passengers will continue to have a choice of airlines at competitive prices after IAG's takeover of Aer Lingus.”

“The five million passengers travelling each year from Dublin and Belfast to London will be able to choose among several strong carriers. And we are also protecting passengers travelling on connecting flights between Ireland and the rest of the world," she added.

The clearance decision is conditional upon the release of five daily slot pairs at London Gatwick Airport to facilitate the entry of competing airlines on routes from London to both Dublin and Belfast; and Aer Lingus continuing to carry connecting passengers to use the long-haul flights of competing airlines out of London-Heathrow, London-Gatwick, Manchester, Amsterdam, Shannon and Dublin.

The Commission’s investigation found that the transaction, as initially notified, would have led to high market shares on the Dublin–London, Belfast–London and Dublin–Chicago routes. The merged entity would have faced “insufficient competitive constraints” from the remaining players which could ultimately lead to higher prices, it said.

According to the Commission’s ruling, IAG has submitted commitments to release these five daily slot pairs at London Gatwick which can be used on the specific routes of concern, namely Dublin - London and Belfast - London. The availability of these slots, and other incentives such as the acquisition of grandfathering rights after a certain period of time, will facilitate the entry of competing airlines.

IAG has confirmed it will release five daily slot pairs to other airlines at London Gatwick for flights between the airport and Dublin or Belfast.  It said that specifically, two of the five daily frequencies must be operated between Gatwick and Dublin and one daily frequency must be operated between Gatwick and Belfast, with the remaining two frequencies open to be operated between Gatwick and either Dublin or Belfast.

Ryanair, one of the existing shareholders of Aer Lingus, has said it will bid for these slots being released at London Gatwick to support its own network development. "We welcome the proposals by IAG that they would surrender some slots in Gatwick. We will certainly be bidding for the slots and we would certainly want to expand services we offer at Gatwick," said its chief executive officer, Michael O‘Leary.

The Commission also analysed whether there was a risk that IAG would prevent passengers flying on Aer Lingus' short-haul flights, from Dublin, Cork, Shannon, Knock and Belfast, from connecting with long-haul flights operated by competing airlines out of other European airports, including Heathrow, Gatwick, Manchester, Dublin and Amsterdam.

It said in its antitrust approval for the $1.4 billion takeover that IAG has made a commitment to enter into agreements with competing airlines which operate long-haul flights out of London Heathrow, London Gatwick, Manchester, Amsterdam, Shannon and Dublin so that Aer Lingus will continue to provide these airlines with connecting passengers.

Passengers will therefore continue to have a choice to use other airlines than IAG when connecting at these airports, for instance on Heathrow–New York, Gatwick–Las Vegas, Manchester–Orlando, Amsterdam–Singapore, Shannon–Chicago, and Dublin–Chicago.

“These commitments adequately address all competition concerns identified by the Commission. The Commission therefore concluded that the proposed transaction would not significantly impede effective competition in the European Economic Area (EEA) or a substantial part of it,” it said in its final ruling.

In our analysis of OAG Schedules Analyser data we highlight the main points in the network of Aer Lingus, based on its August 2015 flight inventory. Its home base at Dublin Airport accounts for 39.7 per cent of its departure seats, but the importance of the London market is clear to see with two airports from the UK capital among the top four points in the airline’s network based on capacity.


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