By Padraic Halpin
DUBLIN (Reuters) - Britain's competition watchdog has told Ryanair (I:RYA) in a final ruling to cut its 30 percent stake in Aer Lingus (I:AERL), potentially making it easier for British Airways-owner IAG (L:ICAG) to take over the airline.
IAG has made a 1.36 billion euro ($1.53 billion) bid for Aer Lingus, but the deal is conditional upon winning support from Ryanair.
The Competition and Markets Authority said on Thursday it was not good for competition when one airline could decide if a bid for its major competitor succeeded or failed.
"We need to ensure that, whatever happens in relation to this particular transaction, Ryanair's ability to hold sway over Aer Lingus is removed," the watchdog said in its final ruling on the issue.
"We will liaise closely with other authorities to ensure that our requirement for Ryanair to reduce its stake works effectively alongside shareholders' consideration of the IAG bid and assessment of the bid by the European Commission."
The watchdog had said in April in a provisional ruling that Ryanair remained a major hurdle to any merger after Ryanair had asked it to reconsider an original 2013 ruling that it must cut its Aer Lingus stake to below 5 percent.
Ireland has already said it will sell its 25 percent stake in Aer Lingus to IAG. Ryanair has said it would consider the bid once it had received the formal offer document.
The budget airline has made a series of legal challenges to the British competition watchdog order to reduce its Aer Lingus shareholding by at least 25 percent and is planning to appeal to Britain's Supreme Court.