RyanAir Loses State Aid Battle

by Ulrika Lomas, for LawAndTax-News.com, Brussels

29 January 2004

Low cost airline, Ryanair will be obliged to repay millions of euros in subsidies offered by the Belgian authorities, following the European Commission's decision that they constitute illegal state aid.

Following a meeting on Monday, Ryanair revealed that the ruling will also effectively mean a ban on all such subsidies in the future, and warned that this will have a significant impact not only on its routes, but on the entire budget aviation industry in Europe.

According to the Financial Times, which saw a copy of the draft EC report set to be officially released next Tuesday, the Commission has ruled that the 50% reduction in landing charges, and the ground-handling fee rebates afforded to the airline by the Walloon authorities for flying to the Charleroi regional aiport, constituted illegal state aid.

The EC also frowned upon other benefits received by Ryanair from the Belgian authorities, which include contributions towards training and accommodation for Ryanair staff, payments of EUR160,000 for each new route opened from Charleroi, and payments towards the cost of recruiting and training crew and pilots.

The FT revealed that according to the draft decision, such benefits must henceforth be limited to 50% of overall costs, may only be granted for a maximum of three years, and must be linked to the opening of new routes.

"It's going to send shockwaves across the industry. Our worst fears are being confirmed," Ryanair's head of regulatory affairs, James Callaghan told journalists following Monday's meeting.

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