Dechert Obtains Clearance for Aer Lingus-CityJet Wet Lease Agreement
January 22, 2019
A Dechert LLP antitrust team successfully gained Phase 1 clearance from the UK Competition and Markets Authority (CMA) for client Aer Lingus’ agreement with CityJet. The agreement allows Aer Lingus to continue to offer scheduled passenger flights between London City Airport and Dublin, using planes wet-leased from CityJet. The Dechert team was able to persuade the CMA that, absent the deal, no other airline would have partnered with CityJet, leading to a loss of choice and capacity on the route. This is a rare example of the CMA accepting such a “counterfactual” argument.
CityJet was operating scheduled flights between London City and Dublin airports, but (following a review of strategy) decided to cease scheduled operations and offered instead to fly on behalf of Aer Lingus. Aer Lingus commenced operations on 28 August 2018, leasing CityJet aircraft, crew, and slots for a limited period, and honoring tickets that CityJet had already sold. The CMA took the view that Aer Lingus was in effect acquiring a business rather than just acquiring services from CityJet. The finding appears to lower the bar for identifying a “merger” in such circumstances and is at odds with the approach adopted by competition authorities in other jurisdictions.
The CMA’s concern was that the only other airline serving London City/Dublin was, like Aer Lingus, a member of the IAG group. Nevertheless, the parties succeeded in persuading the CMA in Phase 1 to accept the so-called “exiting firm counterfactual” argument, making this victory a rare precedent. The CMA cleared the deal, concluding that “no other airline would have been interested in taking over the business” and “for that reason, without the agreement, the assets transferred by CityJet to Aer Lingus would have instead been used to operate other routes, resulting in a loss of capacity and therefore less choice for customers on the London to Dublin route.”
The Dechert team included antitrust partner Alec Burnside, and associates Marjolein De Backer and Maria Loudjeva.
The decision was published today and is available at this link.
About Dechert
Dechert is a leading global law firm with 27 offices around the world. We advise on matters and transactions of the greatest complexity, bringing energy, creativity and efficient management of legal issues to deliver commercial and practical advice for clients.
