Ryanair shares slump 5% after Luton statement

SHARES in Ryanair slumped by 5% yesterday after the airline said it would invest €195 million expanding its base at Luton Airport.

Ryanair said it would start nine new routes to Europe from Luton, near London and base four new Boeing aircraft at the airport as part of its expansion plans. The airline’s chief executive Michael O’Leary said the expansion will create 1,000 new jobs at the airport and in the local economy.

“Consumers using London Luton Airport now have a real low fares airline offering fares that are half the price of Easyjet, serving 11 destinations throughout Europe and delivering unbeatable punctuality, and that’s Ryanair.”

Despite the announcement, shares in the airline fell 25 cent to €4.75 on the Irish stock exchange yesterday, a 5.05% fall.

However, the airline denied that the deal at Luton was linked to the legal row that has broken out with Stansted Airport and its owner the British Airports Authority (BAA).

BAA has lodged papers with the High Court in London seeking €1.5 million in unpaid landing fees. In response Ryanair has issued its own suit, accusing BAA of overcharging the airline for costs associated with building a fuel hydrant. It said it would not pay the landing fees because the fuel bill was unfair.

It said the levy introduced to recoup money from the €18.8 million fuel hydrant system built in 1991 had already been recouped by the airport, but the fuel levy is still being imposed.

Mr O’Leary told a press conference in London: “There is going to be the mother and father of all wars. We are not prepared to be robbed at Stansted. It is a low-cost airport with a high-cost fuel-levy scam going on.”

The war of writs stepped up a gear with BAA saying it is ending the current landing fees deal with Ryanair, a move that could result in an increase in the airline’s costs. BAA said the landing fees at Stansted would rise from €4.21 per passenger to €7.35. Based on the 12.5 million Ryanair customers who pass through Stansted every year this could add nearly €40 million to its cost bass.

This is not the first legal or regulatory row Ryanair has found itself in.

In January, the European Commission ruled a contract between the airline and the owners of Charleroi Airport near Brussels breached state aid guidelines.

Shares in Ryanair have lost 20% of their value in the past year as the airline has been forced to slash ticket prices to attract passengers, leading to the first fall in its quarterly profits in June.

The airline, though, says it will ultimately be the winner of the battle of low cost carriers and this winter it predicts that several airlines will go out of business.