Is Mick O'Leary just a big EU subsidy-bunny?
Published 14/03/2010 | 05:00
IS Ryanair boss Michael O'Leary, who never misses an opportunity to portray his macho free-market credentials, really a subsidy-bunny? The Irish budget airline is being pursued by Air France-KLM, which alleges that it received up to €649m of illegal subsidies in the form of discounted airport charges and other benefits last year.
Last November, Air France filed a complaint with the EU Commission about the financial aid Ryanair receives from French regional airports in the form of reduced landing charges, lower baggage-handling fees and marketing support.
Air France argues that the value of these discounts and freebies to Ryanair is at least €35m per year from the 25 French regional airports to which the Irish airline flies. It goes on to argue that these payments and discounts represent illegal subsidies.
According to a report in the French newspaper Le Figaro, Air France estimates that the value these lower charges and marketing supports from regional airports works out at between €9 and €32 per passenger, depending on the airport.
However, Air France hasn't confined its attention to the sweetheart deals Ryanair allegedly receives from French regional airports.
It goes on to argue that when the favourable airport agreements Ryanair has throughout Europe are added to the mix, each of its 60 million passengers is indirectly subsidised by €11.
If, and it's an awfully big if, the Air France calculations are correct then Ryanair, which recorded an operating (pre-interest) profit of €144m before exceptional items and carried 59 million people in the year to the end of March 2009, is dependent on its airport deals to stay in the black.
At €11 per passenger, the illegal subsidy alleged by Air France would have been €649m, more than four times Ryanair's declared operating profit last year.
Nonsense, says Ryanair. Describing the Air France allegations as "false", Ryanair went on to point out it that carries 6 million passengers a year to and from French regional airports and supports 6,000 jobs in those airports.
Regardless of the rights and wrongs of these claims, the Air France complaint to the EU Commission demonstrates that the issue of Ryanair's deals with regional airports, which first surfaced when the commission took Ryanair to task for the outrageously beneficial deal it had negotiated with Charleroi airport in Belgium a few years back, has not gone away.
This is despite O'Leary's, ahem, selfless service on the 'Yes' side in last year's Lisbon referendum.
If Air France is even half right (that is, that soft airport deals represent an average subsidy of €5.50 per passenger), then Ryanair is more dependent on low or non-existent airport charges than had previously been suspected.
With the breakdown in its talks with Boeing last December signalling that the days of 20 per cent annual passenger growth are drawing to a close, the resurrection of the airport charges issue will pile even further pressure on O'Leary's outfit.