Ryanair has come out fighting as it confirmed a leak from the European Commission (EC) that Brussels will almost certainly rule that the carrier benefited from illegal state aid when setting up a base at Brussels Charleroi.
Ryanair chief executive Michael O'Leary warns he will shut down the carrier's Charleroi base pending an appeal if the EC comes down heavily against Ryanair. Virgin Express, the low-cost carrier based at Brussels International, says it will happily replace Ryanair if this happens.
O'Leary says he will also enter into talks with Charleroi airport and its owner, the Walloon regional government, with a view to privatising the airport should the decision go against Ryanair. A deal could then be struck along similar lines to the original deal drawn up in 2000, but bypassing the issue of state subsidy.
O'Leary believes, however, that Ryanair has grounds for an appeal on the basis that Charleroi complied with the market investor principle that demands that the deal would be a rational one for a private sector investor.
Speaking at the recent European air law association conference in Brussels, Ryanair's new head of government and industry affairs, Jim Callaghan, said the no-frills carrier has lower costs at privately operated Glasgow Prestwick in the UK than it does at Charleroi. In addition, Ryanair argues that the same deal was on offer to other airlines. "We're the only idiots prepared to be first mover into these airports, " says Callaghan.
However, Virgin Express chief executive Neil Burrows says it would be difficult for a carrier to take on Ryanair at Charleroi. He says that any airline that accepted the Charleroi contract conditions "would be forced out of the airport by the Ryanair tactic of giving seats away free on the new entrant's routes". He says that this was what happened when the UK low-cost carrier Go took on Ryanair on routes from Glasgow and Edinburgh to Dublin. "Ryanair is currently using large amounts of its cash from past and current subsidies to grab market share from other carriers by offering free, or almost free flights," he says.
Burrows makes plain his annoyance at Ryanair's high-profile campaign in the run up to the decision and complains that the subsidies put carriers operating out of the main Brussels hub at a clear disadvantage.
He estimates that when "indirect" subsidies such as security costs, fire personnel salaries, airport and runway maintenance and airport infrastructure costs are taken into account, the total subsidy amounts to €30 ($36) per passenger. The responsibility for the costs of these types of activities, particularly security, varies widely across the European Union.
Burrows also claims that many of Ryanair's claims on job creation are "exaggerated". He says: "The reality is that few jobs are offered by Ryanair and many of those jobs they claim are created are paid for out of taxpayers' money by the regional authority." He adds that many of these jobs are for non-Belgian nationals, who escape high Belgian taxes and social costs.
He also uses the environmental argument, claiming that the growth of Charleroi is encouraging passengers to travel to airports by car, rather than the rail alternatives that are available at Brussels International.
O'Leary counters: "In other industries, successful low-price retailers such as IKEA, Aldi, Lidl and Tesco use lower- cost, out of town sites and their purchasing power to lower costs and prices for consumers. Why shouldn't Ryanair be allowed to do the same in the European airline sector?"
He points to what he claims are similar deals struck by easyJet at Berlin Schoenefeld, Hapag-Lloyd Express and Germanwings at Cologne and myTravelLite and bmibaby at Manchester.
Although the case refers specifically to the Charleroi deal, Brussels insiders say that the ruling will effectively set the guidelines for deals between carriers and airports as regards state aid. Other airport deals struck by Ryanair at Strasbourg and Pau in France and Aarhus in Denmark are also coming under scrutiny.
Source: Airline Business
