Ryanair firm under more scrutiny

A CONTRACT between a little-known offshore company owned by Ryanair and Montpellier Airport in France could be the latest agreement involving the no-frills airline to run in EU legislative difficulty.

Leading Verge, a wholly-owned subsidiary of Ryanair based in the Isle of Man, won a public tender issued by Montpellier Airport last year which could be worth over 600,000 per annum.

The deal is believed to be unique among the various marketing agreements Ryanair has reached with about 20 airport authorities in France.

Leading Verge is increasingly being used by Ryanair to provide non-aviation services to airports. However, the airline has denied it is using the company to circumvent an EU ban on regional and State aid.

A spokesperson for Montpellier Airport refused to state how many companies had responded to its invitation to tender, won by Leading Verge last October.

The ability of the winning bidder to promote routes carrying a minimum of 60,000 passengers, especially those from northern Europe, was rated a more important criterion than cost.

“There are official and legal investigations being carried out at this moment, so we cannot provide any information to the media,” said the airport’s spokesperson.

It is believed the concept of a public tender was devised to get around legal restrictions on subvention, especially after the airline threatened to switch its services to the nearby airport at Nimes.

The president of Montpellier Airport, Cyril Reboul has previously complained that the airline demanded “exorbitant fees” when they first sought to operate services to Montpellier in 1996.

Leading Verge has also secured a similar contract with the airport authorities in the Austrian city of Salzburg.

Ryanair has refused to answer any detailed questions about Leading Verge despite the fact the airline’s chief executive Michael O’Leary is listed as one of its five directors. The airline is currently facing a number of separate legal challenges which is threatening to undermine its low-cost base.

The company, which holds its annual general meeting in Dublin today, makes no reference to Leading Verge in its recently published annual report, although it lists several other subsidiaries.

While most of these are registered in Ireland, it is believed Leading Verge was registered offshore as Manx company law does not require it to file annual returns.

Asked why Leading Verge was registered in the Isle of Man, a Ryanair spokesperson remarked: “Because it’s based there.”

The outcome of an investigation by the EU Competition Commission into a contract between Ryanair and the local authority which runs Charleroi Airport in Belgium could have a major impact on the airline.

Around 20% of the airports it flies to are publicly owned and many have similar contracts. If the Commission finds against Ryanair, the airline may have to pull out of some or all of these airports or pay back the support it has received.

But Shane Matthews, aviation analyst at NCB Stockbrokers, believes its Charleroi deal will not be changed by the EU Commission investigation and added a successful conclusion would see a strong rebound in Ryanair’s share price.