Ruling could hit Ryanair deals

A LANDMARK European Commission ruling next month on subsidies to regional airports could profoundly affect the business model of low-cost airline Ryanair and other bargain carriers, EU officials say.

Ryanair lost a legal battle in France on Thursday when an appeals court upheld a ban on a subsidy by the local chamber of commerce to help it start a Strasbourg-London route, after a challenge by an Air France subsidiary.

But EU officials and industry analysts say a Commission decision in late

October on the legality of regional subsidies to Ryanair at its Belgian hub in Charleroi, south of Brussels, will set a wider precedent for the industry that could be as important as the 1994 liberalisation of European air transport.

"This decision will lead to setting European rules for regional aid of this kind and subsidies to airports," a Commission official said.

Ryanair chief executive Michael O'Leary sounded upbeat after talks with EU Transport Commissioner Loyola de Palacio earlier this month.

"I am confident the Commission will not demand changes to the Charleroi contract," he said. Ryanair transports 1.7 million passengers a year through the airport virtually deserted until the airline set up there in 1997.

But Commission officials take a different view.

"The basic problem is that public money is going to airlines," an official in the EU executive said.

Several EU sources said the Commission was likely to conclude the contract between Ryanair and Brussels South Charleroi Airport, in which the Wallonia regional government holds an 80% stake, contained illegal state aid.

The Commission spelled out its suspicion in a letter it sent the Belgian government on January 25 requesting an explanation for the 15-year agreement between the Wallonia region and Ryanair signed in November 2001.

The Wallonia regional government has also provided one-off assistance of €250,000 for hotel accommodation and subsistence for Ryanair staff and contributed €768,000 towards recruitment and training of pilots and cabin staff.

It spent €3.8m in 2002 on funding advertising and low-cost tickets for Ryanair flights from Charleroi.

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