EU clears French subsidy for Ryanair Toulon-London route

EU regulators in Brussels today cleared a French subsidy to Ryanair to help it start flying from Toulon to London Stansted – just weeks after the company complained about government funds paid to rival Air France-KLM.

The owner of Toulon Hyeres airport, the Chamber of Commerce and Industry of Var, can go ahead and pay 50% of Ryanair's “additional costs” up to a €500,000 threshold per year for three years, the European Commission said. The aid may also be extended for an extra two years.

Ryanair has expanded rapidly with its “no-frills” low-fare flights undercutting rivals. It usually flies to smaller regional airports that often offer low charges or subsidise its costs to attract new business.

Regulators said they approved the grant because it met EU guidelines designed to stop government money giving a company an unfair advantage over rivals. It said the French funds would help develop year-round tourism in the region.

Ryanair’s roll-out of new routes in France has led to a spat with France’s flagship airline that has seen it file two antitrust complaints against Air France.

Air France-KLM, the world’s largest airline by revenue, has also complained about lower airport fees offered to Ryanair by Marseilles airport to help it serve 13 routes and bring in up to one million extra passengers. It said it has appealed to the Council of State, France’s highest administrative body, against discriminatory fees.

Ryanair said the French Civil Aviation Authority had cleared the fees, describing the complaint as “the latest in a long line of abuses by Air France to protect their stranglehold on the French market”.

It filed a complaint to the European Commission last month regarding approximately €1bn worth of state aid it alleged Air France has received in the form of subsidised domestic landing and passenger fees.

Ryanair is still fighting an EU ruling that ordered it to pay back a €4.5m Belgian subsidy to run flights out of Charleroi airport.

In February 2004, EU regulators ruled parts of Ryanair’s contract with Charleroi were illegal and ordered the airline to make changes. Charleroi was granting the airline up to 90 percent of its costs over 15 years.

Ryanair is appealing the ruling at the European Court of Justice in Luxembourg.