Ryanair and the tale of the illegal subsidy

Ryanair, the World’s most hated airline, have recently had an extension to their “contract” to provide flights into and out of Lübeck airport in Germany for another 2 years.

For those wondering where the hell Lübeck is, Ryanair refer to it as Hamburg. It’s far from it, literally. A quick calculation on Google maps shows it being an over an hours coach journey away.

Anyhow, back to the story…

Lübeck is just one of around 200 small, regional airstrips across Europe that Ryanair apparently use to generate hundreds of millions of subsidy payments.

A spokesman for Lufthansa said “If we removed all aid and subsidies received by Ryanair, the company would show a very different economic balance sheet”.

Pending the conclusion of a number of European investigations into illegal subsidies, French newspapers have assessed the situation and believe that these subsidies amount to about 35 million euros in France alone. They base this on the audits carried out at several French airports controlled by local authorities.

Across Europe as a whole they reckon this figure is nearer 660 million euros!!!

Airports funded by state and local taxes and subsidies provide so many free services to Ryanair that the Irish carrier is almost always the better off as part of these agreements.

Some airports do not just provide free staff and check-in desks for Ryanair, it is claimed that they are also responsible for free cleaning of aircraft. Ryanair planes also often have the right to free use of airstrips.

All of this, according to the audits, seems to fall under the guise of “marketing assistance” which basically means that Ryanair will feature these provincial towns in their magazine, on their website and of course that they will bring a few people along for a visit.

In some cases, the net subsidy is up to about 32 euros per passenger, as in Rodez, where Ryanair received more than 3.2 million euros between 2004 and 2006 for only three flights per week in each direction.

Some airports are struggling to pay such sums. Take Bergerac for example, Ryanair has received 2.3 million euros in subsidies from the airport, which has itself been asking for 500,000 euros in aid from the region government in order to avoid bankruptcy.

Currently, airports who refuse to pay run the risk of Ryanair disappearing overnight and reopening a few days later somewhere down the road, in the middle of nowhere.

If Ryanair can behave this way it is because there is no limit to the amount of subsidies that a company may apply to the regions. The company is not obligated to repay any of the aid even if there is a suspension of service.

Until last spring, the issue of competition between airlines and government assistance was mainly managed by the Directorate of Transport of the European Commission. However, things should change now that the new Commission took office, and the European Commissioner for Competition is responsible for competition issues and state aid for all sectors of the economy. According to sources at Lufthansa, this means that the remaining five or six complaints about subsidies received by Ryanair should rapidly be examined and judged.