Ryanair Comment on EU Decision

Ryanair and the overwhelming majority of other low fares airlines and regional airports all over Europe today (Sunday, 1st February 2004) criticised severely the findings of the EU Commission’s draft decision on the Charleroi cost base. Briefings and leaks from the Commission indicate that they will rule against discounts on landing charges and handling charges at Charleoi, and that the Commission will attempt to use this ruling to restrict discounts and other incentives at publicly owned airports all over Europe.

In summary:

á This is a bad decision with seriously negative implications for consumers, airlines and airports.
á The Commission is undermining airlines and airports wishing to offer value to consumers.
á This type of arrangement at Charleroi was approved by the Commission in July 2001.
á A negative decision ordering retrospective payment would leave all airlines and airports exposed to the prospect of retrospective repayment claims.
á Seeking recovery of alleged aid is inequitable, as the law and policy are still so unclear that the Commission has still been unable to draft guidelines.
á An unacceptable decision will force Ryanair and other airlines to consider the viability of routes involving State airports across Europe.
á The alleged aid has already been passed onto consumers by way of huge savings through low air fares.

A Ryanair Spokesman criticised these findings on the following grounds:

1. This decision is an unwarranted political interference in the operation of the free market, where regional airports such as Charleroi freely enter into long term discounted arrangements with airlines in order to develop routes, traffic and low fares for consumers in their region, and where these arrangements result in a profitable business for the airport as is the case at Charleroi. The Commission should not be damaging these regional airports, or the right of users of these airports to avail of low fares, by forcing airports - against their will - to increase these charges which will result in higher fares for ordinary consumers.

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2. This decision will result in higher fares for consumers by forcing the low fares airlines generally to pay higher costs, and these costs will be reflected in higher fares for the travelling public. This will reverse 20 years of competition, deregulation and low fare air travel which has been so dramatically successful within the EU, and has seen the growth of a wide number of low fares airlines which today carry over 70 million passengers annually. The emergence of Ryanair and other low fare airlines has forced the flag carriers around Europe to offer lower fares to consumers and the Commission’s anti-consumer ruling will remove this downward competitive pressure on the high fares carriers. The principal beneficiary of this decision will be Europe’s high fare carriers, all of whom will welcome the imposition of increased costs at airports and higher fares on low fares airlines.

3. This decision will render it much more difficult if not impossible, for publicly owned airports to compete on a level playing field for new route and traffic growth against privately owned airports all over Europe. These privately owned airports will be free to offer discounted arrangements and develop profitable business in the way that many have in recent years, such as Stansted Airport (Ryanair and Easyjet), Luton (Easyjet and Ryanair), Glasgow Prestwick (Ryanair), Belfast International (Easyjet) and Frankfurt Hahn (Ryanair).

4. This decision will threaten the development of low fare services at many publicly owned airports in Europe, as the precedent will not just be confined to Ryanair. The spotlight will be on deals such as Easyjet’s 20 year arrangement at the publicly owned Berlin Schonefeld airport; Easyjet’s discounted arrangement at Marseille and Toulouse airports in France; Flybe’s discounted arrangements at a number of French regional airports; as well as the discounted arrangements of a number of the German low fares airlines at the publicly owned German airports.

5. A negative ruling will also affect the discounted arrangements enjoyed by a number of flag carrier airlines including, the six year new route discount schemes upon which Aer Lingus is opening 12 new routes from the Irish government airports in Dublin and Cork. The €3.8 million annual subsidy paid by Leipzig airport to the Lufthansa group will also be challenged. It also raises an interesting issue at loss making airports such as Munich, which lost €51 million in 2003, as to whether this represents a hidden subsidy of €1 million a week, principally to Lufthansa, and whether Lufthansa will have to pay higher charges at Munich airport to eliminate this €51 million annual subsidy. By contrast, Charleroi is profitable. The Commission’s draft decision would force all airlines to retrospectively pay back any such discounts and other incentives they have received.

6. This negative finding by the EU Commission is opposed by the majority of Europe’s low fares airlines (see ELFAA statement ‘A’ attached) by the Forum of European Regional Airports (‘B’ attached) and the Assembly of European Regions (‘C’ attached). It will have the support of Europe’s high cost airlines and high cost airports because it will limit the growth of Europe’s publicly owned regional airports and increase airfares for Europe’s consumers.

This anti-consumer finding in the Charleoi case will not be confined to Ryanair and Charleroi. It will be seized by Europe’s high fares airlines and high cost airports to limit competition and reduce choice at regional airports, and to increase costs and airfares for Europe’s consumers. Air travel should not be the preserve of the rich few or the high fare carrier airlines. Low fare air travel should be the right of every European citizen regardless of their income. Ryanair and the other low fares airlines in association with Europe’s regional airports have transformed air travel over the past 20 years by lowering airfares and developing direct routes from the regions of Europe. This anti-competitive interference by the European Commission to prevent discounts and incentives at publicly owned airports will increase costs, increase airfares and make it much more difficult for publicly owned regional airports to compete with privately owned airports to develop routes and low fare traffic for the benefit of their region.

This decision will reverse 20 years of deregulation and increased competition in the European air travel market. This EU Commission would not dream of preventing supermarkets and fast-food restaurant chains such as McDonalds, from negotiating discounts with their suppliers and passing on these savings in the form of lower prices to their customers.

Is this how liberalisation in telecoms, energy, financial services and other sectors will also be reversed in time by the Commission? Can business in Europe trust the Commission, which welcomes liberalisation but then punishes it when it hurts vested interests?

This Charleoi decision is therefore wrong and contrary to the interests of passengers as it will prevent low fares airlines and regional airports from freely and willingly entering into low cost arrangements in order to offer new routes and low fares to the air travel consumers of Europe.

We are calling on the Commission to issue a statement if the decision on Tuesday forces Ryanair to pay back so-called illegal aids that all European airlines will likewise be forced to pay back such ‘state-aids’ - in the interest of fair competition.

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