Ryanair subsidies are just business

RYANAIR’S ‘subsidies’ are just business say airline commentators, after Air France complained to the European Commission that the company was receiving ‘illegal aid’.

Air France says at least 25 airports gave Ryanair €660 million in financial aid such as reduced taxes, preferential ground handling rates and marketing funds and says the low-cost airline will only use routes where aid is given.

It has taken its case to the European Commission's Transport Directorate-General.

Ryanair has already hit back saying: “They can’t compete with Ryanair so they complain instead. Ryanair is investing millions in regional French airports, whereas Air France ignores them.”

A recent row between Ryanair and Angoulême Airport in Poitou-Charentes which resulted in the airline stopping flights to the airport highlighted the importance of negotiations between low-cost airlines and airports. (Full story page 37.)

Negotiated charges include landing fees and marketing payments to promote the route and the region.

Airline industry analyst Gert Zonneveld, who works for London-based stockbroker Panmure Gordon said charges are not likely to ever affect Ryanair’s business.

“Ryanair has 73 million total passengers per year, and is growing that number by 10% this year. The company has had revenue growth of above 20% almost every year. It is a phenomenally successful airline,” he said.

While part of this success comes from negotiations with regional airports, Zonneveld adds: “These aren’t ‘subsidies’, these are legitimate business deals that the company makes when it brings its business to these airports.” He said the case would “just give Ryanair free publicity.”

“The problem for airports is that regions went overboard building them in the Sixties.

“In Languedoc-Roussillon alone, there are six, each about 40 kilometers away from each other. Ryanair can choose whichever one offers the best deal, and make its own terms,” he said. At Bergerac Airport, Ryanair brings in about e198 million with spending from the British, Belgian, Dutch, and Irish tourists who otherwise would never have gone near the place, said Zonneveld.

Beauvais Airport director Marc Amoudry said the airport had seen the number of its employees increase from 40 to 800 since Ryanair began flying there in 1997 and that it had taken about €600m in revenue as a result of Ryanair traffic.
“Numbers like these explain why Ryanair is able to drive a hard bargain with the airports that it chooses to work with – and if it doesn’t get what it wants, it goes elsewhere,” Zonneveld added.

Aviation consultant John Strickland, who has worked with airlines and airports on route development, said airlines such as Ryanair, Easyjet, Jet2 and Flybe brought a lot of business to French regions and each side benefited economically from route development.

To reduce risk and secure profitability airlines will aim to achieve discounts on charges and marketing support from airports and their partners . The economic benefit achieved by the regions far outweighs the need to share risk with the airlines

An aviation journalist, who wanted to remain anonymous, said Ryanair’s airport deals were “just business”. He said Ryanair pays €62.50 landing fees at Biarritz for a Boeing 737 when other airlines pay €365 – which means Ryanair pays €159,000 less a year.

He added: “They are a very aggressive business. They are in it to make money for their shareholders and to fly people about and they are very good at both – but Ryanair don’t depend on subsidies.”

The Commission case will take several years.

Even if Air France succeeds, the European Court of First Instance has already over-turned a previous ruling ordering Ryanair to repay subsidies at Charleroi in Belgium. The Commission is also investigating a separate complaint that the airline gets illegal aid at seven airports in Europe.

Union CGT Air France has also brought charges against Ryanair to the Commission for allegedly ignoring union rules.