Ryanair insists Isle of Man subsidiary not an EU dodge

RYANAIR has denied it is using a little-known, Isle of Man-based company as a vehicle to circumvent an EU ban on regional and State aid.

The company yesterday declined to answer detailed questions about Leading Verge its wholly-owned subsidiary registered in the Isle of Man and which lists Ryanair chief executive Michael O'Leary as one of its directors. Since 2002, the company has increasingly been used by Ryanair to provide services to airports and their associated local authorities which are used by the airline.

Although Ryanair declined to say how many airports had an association with services provided by Leading Verge, it is known the company has agreements to market and promote a number of destinations in France and Austria. Rival competitors claim the airline demands funding under the guise of marketing support packages as a pre-condition before flying services to certain airports.

A representative of one airport in south-west France not served by Ryanair admitted it had suffered because it turned down the airline's demand for "hello money". The company has also demanded similar deals from airports previously serviced by the rival low-cost airline Buzz, which Ryanair acquired earlier this year.

Ryanair's low-cost base is coming under increasing threat following a recent decision of a French court which ruled the airline must terminate its agreement with the Chamber of Commerce in Strasbourg as it could constitute illegal State aid. The deal was estimated to be worth around €1.5 million each year to Ryanair.

As a result, Ryanair announced this week it was going to discontinue its Strasbourg service and replace it with flights to a nearby airport across the German border in Baden-Baden.

Ryanair has similar deals with over 20 publicly-owned airports across Europe. Its agreement with the local chamber of commerce in the central French city of Clermont-Ferrand is worth €700,000 per annum.

The airline is also facing a similar challenge to its services to Pau in France, while the European Commission is due to issue a major ruling this autumn on funding provided by a regional authority to Ryanair for operating flights out of Charleroi in Belgium. "We are confident we will get a positive result. Otherwise, secondary airports will never be allowed to develop," a Ryanair spokesperson said.

It is believed Leading Verge is registered offshore because it is not obliged to file annual accounts under Manx company legislation. Ryanair does not operate any flights to or from the Isle of Man. Official documents claim the company's principal business is internet trading but a Ryanair spokesperson claimed its primary function was as "a marketing company."

Leading Verge's website links visitors automatically to the main Ryanair internet portal. Asked why Leading Verge was registered in the Isle of Man, a Ryanair spokesperson replied: "Because it's based there."

John Mattimoe, air transport analyst with Merrion Stockbrokers, said the impact for Ryanair customers would not be particularly significant, even if the airline lost all three cases.