The UK Competition and Markets Authority (CMA) has launched an investigation into the proposed long-term wet-lease agreement between CityJet (WX, Dublin Int'l) and Aer Lingus (EI, Dublin Int'l), suspecting that it might, for practical reasons, amount to a merger of the companies.

"The Competition and Markets Authority (CMA) has reasonable grounds for suspecting that it is or may be the case that arrangements are in progress or in contemplation which, if carried into effect, will result in Aer Lingus Limited (Aer Lingus), its parent entity International Consolidated Airlines Group SA (IAG) and certain assets of Cityjet Designated Activity Company (CityJet) ceasing to be distinct," the agency said in an Initial Enforcement Order.

The CMA further added that, pending the outcome of the initial investigation, it might launch a full-scale merger inquiry into the agreement.

For the time being, the CMA did not bar the two Irish airlines from putting their agreement in place, although it imposed a number of restrictions.

The two carriers and IAG International Airlines Group, which owns Aer Lingus, were explicitly barred from engaging in any further business transactions which could impact on the investigation. The companies will also have to report weekly any planned changes to the use of slots at each of Dublin Int'l and London City, as well as any planned schedule changes (including aircraft type substitutions) on the route.

"This Order does not prohibit IAG, Aer Lingus, and CityJet from commencing and carrying out their obligations under the Long Term Wet Lease Agreement, provided that IAG and Aer Lingus and CityJet observe the restrictions," the CMA stressed.

It is recalled that CityJet plans to terminate own scheduled operations on October 27, 2018, following the transfer of its last route, Dublin -London City, to an ACMI service on behalf of Aer Lingus. Under the terms of the agreement, CityJet will wet-lease two ARJ-85s to the Irish airline and operate 36 weekly roundtrips between Dublin and London City. This will give IAG a monopoly on the route given CityJet currently competes with British Airways (BA, London Heathrow) subsidiary BA CityFlyer (CJ, London City).