The nature of deals struck between low-cost carriers and Europe's regional airports could come under more intense scrutiny following the European Commission's (EC) decision to investigate Ryanair's agreement with Brussels South Charleroi Airport.

The EC, which began looking into the deal earlier this year, says it has "doubts regarding the nature of the measures taken by the Walloon Region and by Brussels South Charleroi Airport, which exclusively benefit Ryanair and might constitute state aid."

According to the EC, when Ryanair first set up its base at the airport, which is 46km south of Brussels and owned by the Walloon regional government, the carrier obtained reduced landing and ground handling fees, concessions from the airport to recruit, train and house staff, and a substantial contribution towards marketing activities.

Both Ryanair and Charleroi are confident that the investigation will show the companies have not broken state aid rules. Neither deny the terms of the deal. "The arrangements between Ryanair and Brussels Charleroi comply with the principle of the private investor in a market economy," says the carrier.

According to Charleroi's spokesman Pierre Fernemond: "Any airline, especially in the low-cost world, discusses very hard with airports. Airlines ask airports to share the risk of any new routes." The airport was in a tough three-way competition to secure Ryanair's first mainland European base at the end of 2000. It has been open about the package it agreed with Ryanair, he says, which includes the €160,000 ($164,000) given for marketing any new route.

Charleroi says the deal offered to Ryanair, which was checked by its lawyers to ensure it complied with European competition law, is available to any other carrier that comes into the airport at the same level of operations. The deal relied on Ryanair basing three aircraft at Charleroi and a certain volume of flights. Today Ryanair is still the only scheduled carrier at the airport and is expected to carry 1.3 million passengers there in 2002 on 15 daily flights.

The EC says the investigation "does not seek to question the development of low-cost activities which respond to clear consumer wishes, but aims to ensure a level playing field for all airlines".

Ryanair and Charleroi agreed that their deal would be non-exclusive. According to Jürgen Werner, competition partner at the Brussels office of lawyers Norton Rose, it is the issue of exclusivity that is important. It is increasingly common and understandable for regional airports to offer good deals to attract carriers, he says. These only become illegal when they are only available to a particular carrier. "This could become a test case for the behaviour of regional airports," says Werner.

Another potential area of investigation is whether the aid granted by a local government distorts competition between its airport and another. In this case it is between Charleroi and Brussels National. Some airports are located in areas designated by the European Union as needing special economic assistance, and so can justify measures that promote employment.

The Walloon government is seeking to develop Charleroi, and another airport at Liege, for this very reason. The issue of state aid could come into play if the assistance given goes beyond a reasonable level, says Werner.


Source: Airline Business