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Last Updated: Wednesday, 27 June 2007, 14:30 GMT 15:30 UK
Ryanair's Aer Lingus bid blocked
Ryanair and Aer Lingus planes
Ryanair says it will appeal against the decision
The European Commission has blocked low-cost airline Ryanair from making a bid for Ireland's Aer Lingus.

Analysts had widely expected the commission would reject Ryanair's efforts on competition grounds.

The 1bn (1.5bn euros) deal would cut choice and probably lead to higher prices, the commission said, adding it had to "safeguard Irish consumers".

Ryanair said it would appeal against the decision, describing it as "unprecedented and unlawful".

Call for explanation

The ruling will now be reviewed by the European Court of First Instance.

Outlining its judgment, the commission said the two airlines controlled more than 80% of all European flights to and from Dublin airport.

It added that, because of Ryanair's reputation for "aggressive retaliation" and its ability to cut prices, other firms were unlikely to be drawn to the market.

Michael O'Leary
Ryanair will continue to beat Aer Lingus on price and punctuality
Michael O'Leary, Ryanair chief executive

It is the first time in two decades that an airline takeover has been blocked by European regulators.

Ryanair criticised the decision, arguing that a merged company would account for only 5% of total traffic in Europe, and the merger would not put off other airlines from flying in and out of Dublin.

Chief executive Michael O'Leary called on the commission to explain how it could approve mergers between larger carriers such as Air France and KLM when they controlled far larger portions of traffic.

"In the meantime, Ryanair will continue to grow, will continue to offer lower fares and will continue to beat Aer Lingus on price and punctuality," he said.

'Good news'

Ryanair, which holds a 25% stake in Aer Lingus, launched a takeover bid in October last year - just days after its rival was partly floated on the London and Dublin stock exchanges.

The creation of one dominant player out of Ireland, despite the protestations of Ryanair, just cannot be in the interests of consumers
John Sharman
Chairman, Aer Lingus

Large shareholders in Aer Lingus - including the Irish government and an employees' group - had objected to the takeover.

Aer Lingus said that the EU's decision was "good news" for both the airline and its customers.

"Consumer choice is at the core of every competitive market and the creation of one dominant player out of Ireland, despite the protestations of Ryanair, just cannot be in the interests of consumers," said chairman John Sharman.

"We are determined to deliver on our excellent prospects as an independent company."

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