BRUSSELS - The European Commission on Feb. 3 ruled against Ryanair in a state-aid case that the Irish airline has warned will have a "devastating" impact on low-cost air travel in Europe. Ryanair's rivals, however, beg to differ and have been playing down the impact of the EU executive's ruling on a business model that has transformed air travel in the European Union.
The commission ruled that millions of euros in subsidies given to Ryanair by the publicly owned airport at Charleroi, an hour's drive south of Brussels, amounted to illegal state aid. What's more, according to the commission ruling the Irish carrier will have to repay some of the aid.
Ryanair said it would appeal the "bizarre" decision to the EU's highest court.
"This decision will be appealed to the European Court (of Justice)," Ryanair CEO Michael O'Leary said in a statement. "We believe the appeal will be supported by many other low-fare airlines, regional airports and consumer groups."
O'Leary, speaking at a press conference, lashed out at the commission's decision. "We consider this decision to be a disaster for consumers. It's a disaster for low-fare air travel all over Europe, and it's a disaster for publicly owned airports which on the basis of this decision can no longer compete with privately owned airports all over Europe," he said.
Commenting the decision, Belgium's commissioner, Philippe Busquin, said, "It's a balanced decision which allows Charleroi to continue its activities and even to develop new routes because we accepted the principle of start-up aid."
In the run-up to the ruling, sources had said the commission was expected to order Ryanair to repay 3 million euros - 5.5 million euros received from the Wallonia regional government that owns Charleroi. The commission ruled that a 50 percent cut in landing fees granted by the Wallonia authorities to Ryanair was illegal, and it also rejected discounts offered to Ryanair for ground-handling charges.
But the EU executive upheld one of the principal advantages offered to the airline in which the Wallonia authorities gave 4 euros for each passenger landing at Charleroi for Ryanair to spend on marketing.
The commission's ruling would affect about two dozen state-owned airports used by Ryanair and other carriers as well. In theory favorable contracts offered by the airports would have to be renegotiated to guarantee a level playing field.
Local economies have exploded with the passenger influx. Tens of thousands of Britons, for example, use Ryanair for weekends in second homes in previously backwater areas of France, where property prices are booming as a result.
The commission's decision is a test case for Ryanair's business strategy of offering rock-bottom fares by striking deals with regional authorities to use unfashionable airports away from the main hubs.
Despite the angry rhetoric, Ryanair has played down the impact on its bottom line from the commission ruling.
But it has not been a good seven days for the Dublin-based operation. On Jan. 28 Ryanair saw almost a third of its stock market value wiped out after giving a shock profit warning.
The likely amount that Ryanair will have to repay would be a quarter of the estimated 13 million euros it has received since 2001 in return for bringing its business to Charleroi.