Legal battle and price war face Ryanair in months ahead

A mammoth pan-European legal battle, a price war that could see profits halved and a host of angry investors — just some of the problems facing Ryanair in the coming months if the speculation is to be believed.

All this, and chief executive Michael O'Leary has to deal with being compared to Wile E. Coyote as well.

While the low-cost airline's business model has always been admired by the financial community, O'Leary has never been everybody's cup of tea.

Not that he cares.

O'Leary cheerfully acknowledges that his abrasive manner upsets the more sensitive among those he deals with.

He won't have been surprised by the glee which surfaced in recent days when it became clear that Ryanair might be headed for a turbulent period.

So he will hardly care if, in fighting back, he provokes even more hostility towards him.

One sure-fire way of doing exactly that would be to sue his competitors, which, according to the Sunday Telegraph, is exactly what he may do.

Ryanair has instructed its lawyers to launch legal action against every single airline flying into state-owned airports in Europe if a European Commission decision goes against the airline tomorrowTuesday, according to the paper.

The EC is expected to release a judgment saying that Ryanair has received illegal state aid in the form of inducements from Charleroi Airport in Belgium. It is thought the EC will demand that Ryanair pay back some of the subsidy, which stretch back over several years.

"If there is an unacceptable decision, Ryanair will not only appeal it but has instructed its advisers to initiate state-aid cases and complaints against every other airline flying into every state airport which offers concessions and discounts," the airline said.

The majority of European airports which operate below capacity offer discounts to encourage airlines to use them.

The Sunday Tribune, meanwhile, reported that a sustained price war next year could more than halve the company's profits.

But the newspaper also pointed to a more immediate worry, saying the airline was set to record its first quarterly loss since it became a public company seven years ago.

"A rapid drop in fares and passenger numbers is expected to push the company to a 10 million loss in the three months to the end of March," the paper said.

The doom-and-gloom forecasts came in the wake of last Wednesday's profit warning by the company, an announcement that, according to the Sunday Business Post, caught the experts by surprise.

"Both analysts and fund managers were kicking themselves at not having seen it coming," it said. "Each of the major brokerages had Ryanair close to the top of their stock recommendations at the beginning of the new year."

The same paper reported how investors were angry because Ryanair had given them "an upbeat assessment of the company's prospects" as recently as January 9.

Now, according to The Observer, which compared Mr O'Leary to Mr Coyote, the cartoon character famed for running off cliff-edges, those investors are wondering "whether he will magically sprout wings and soar away or plummet to earth".

But, if some of the fund managers who spoke to the Business Post are to be believed, O'Leary is closer in spirit to Bugs Bunny cheeky, chirpy and way too smart for his rivals.

The fund managers' theory? "Ryanair could throw out all the bad news and the kitchen sink in the first half of this year, while giving O'Leary the perfect excuse to screw the opposition by driving down fares and helping the company achieve the dominant market position he so dearly covets."