EC to Investigate Ryanair's Airport Deals

November 16, 2003

EC to Investigate Ryanair's Airport Deals
The Scotsman, UK

RYANAIR’S dependence on subsidised air travel looked to be in deepening
trouble last night after a new call emerged for the European Commission to
investigate the company’s relationship with state-owned secondary
airports.

Industry sources confirmed that a request had been sent to the Commission
by an un-named competitor, asking it to look into Ryanair’s relationship
with state-owned secondary airports near primary hubs.

It also calls on Brussels to monitor any future deals which Ryanair could
have under consideration. The Irish budget airline is already the subject
of an unfavourable Commission verdict on the payments it receives from
Brussels Charleroi airport.

The allegation is that Ryanair has been able to arrange "sweetheart deals"
with certain airports at discount prices which generate new business to
the detriment of larger airports and established airlines in the same
vicinity.

Opponents claim the use of favourable landing charges has meant that
Ryanair and its passengers are enjoying a subsidised service, and are
therefore in breach of European rules covering free competition.

The request is believed to have been triggered by rumours that Ryanair had
been approached to set up shop in two state-owned Spanish airports,
including Girona, which aim to take business away from neighbouring
Barcelona airport.

Other countries that have small state-owned airports and could be affected
by the investigation include France and Italy, as well as Belgium.

Already analysts are braced for confirmation that Ryanair has fallen foul
of the Commission over its operations from Chareleroi, and could be forced
to repay incentives which are said to have been running at £2.5 million a
year.

Ryanair has said it will appeal to the European Court of Justice against
any adverse ruling, and could temporarily suspend its service to the
Belgian airport.

Directors are also considering whether to approach the local Walloon
government to privatise the airport and to renegotiate present
arrangements on similar terms.

Its rival EasyJet claims that it is relaxed about the situation, although
it is believed to have negotiated a particularly attractive deal in its
recent agreement to begin operations from the Schonefeld airport near
Berlin.

An EasyJet spokesman said: "Our understanding is that the investigation is
specific to Ryanair and will have no effect on our business." The threat
to Ryanair’s business model comes at a time when the Irish airline is
running neck-and-neck in Europe with much-larger rival British Airways.

Its success has been bound up with launching cut-price flights to and from
little-used airports that charge much lower fees.

Official figures show Ryanair carried 2.07 million passengers across
Europe in October, only fractionally below the 2.08 million carried by
heavyweight BA.

The no-frills airline is estimated to have brought £90m of benefits to the
Scottish economy through its base at Prestwick airport.
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