O’Leary faces hard landing in legal battle

LOVE him or hate him, there is no doubt that Ryanair’s abrasive chief executive Michael O’Leary has revolutionised tourism in Europe by opening up the airways to millions of people with a low fares, no frills service.

But when he comes down to earth after his honeymoon, Mr O’Leary will find serious questions hanging over his budget airline’s policy following its defeat in a legal battle to delay a court ruling that will effectively end its service to Strasbourg on “anti-competitive” grounds.

Last month, the court ordered Strasbourg Chamber of Commerce to end “incentive payments” worth €1.4 million to Ryanair for flying to the French city.

But when the airline’s request for a stay on the court order was turned down yesterday, it faced the prospect of a year-long appeal against the substantive issue.

After suspending its flights from London to Strasbourg, Ryanair planned to resume the service if a stay was granted by the appeal court in Nancy.

Undeniably, yesterday’s decision has serious implications for the highly successful Irish company, which is one of Europe’s biggest airlines.

In tandem with a potentially more significant inquiry by the EU into a Ryanair deal with Charleroi airport, this scenario could hardly come at a worse time for Ryanair, which has seen an increase in the percentage of empty seats on its flights; a key indicator of profitability. If the Belgian case were to go against Ryanair, dozens of similar deals around the continent may be threatened.

In keeping with the dog-eat-dog environment of the international airline business, the Strasbourg crux emerged when Air France brought a court action against Ryanair claiming its deal with the business group was “anti-competitive” when it started the service in October last year.

But since then, the Ryanair service has greatly boosted tourism in the region, with passengers numbers estimated at 20,000 per month.

Ironically, Strasbourg’s loss has proved to be Baden-Baden’s gain as the airline has already moved to provide a service to the German city just 25 miles away.

But Ryanair’s difficulties are compounded by the separate investigation being conducted by the European Commission over cash benefits which may breach EU rules on fair competition.

Basically, the EU is looking into advantages Ryanair enjoys from operating out of Charleroi airport, where its benefits include reduced landing fees and other special rates.

In characteristic fashion, Mr O’Leary at first shrugged off the gravity of this matter, saying his airline had “no concern” over the inquiry. But EU officials are on record as stating that the case could have widespread implications for the budget airline industry.

If, in the wake of yesterday’s court ruling, the Charleroi case also went against the company, the financial repercussions for the group could be severe. In a case involving Olympic Airways, Brussels ordered the Greek company to pay back €172m in government grants deemed to give the airline an unfair advantage over its rivals.

With the future of budget travel around Europe likely to be affected for up to a decade, the fallout would be profound for the entire European budget airline industry and also for tens of millions of passengers.

It is now of paramount importance to establish transparency in the airline business.