O'Leary vows to defy 'evil empire' over Charleroi ruling

Ryanair was ordered yesterday to repay some of the millions of euros subsidy it received from Belgium's publicly owned Charleroi airport, in a ruling that could push up the cost of budget air travel.

The Dublin-based budget carrier promised to challenge the decision in the European Court, as its outspoken chief executive, Michael O'Leary, launched a tirade of criticism at the European Commission, describing it as an "evil empire" which was taking on the "the good guys" of the air travel business.

"We consider this decision to be a disaster for consumers, a disaster for low-fare air travel all over Europe and a disaster for publicly owned airports," Mr O'Leary said.

So complex was the ruling from the European Commission that no one could say with certainty how much of the €15m subsidy Ryanair received from Charleroi airport will have to be repaid. Loyola de Palacio, the vice-president of the European Commission who is responsible for transport, said 70-75 per cent of the cash and incentives from Charleroi, which is owned by the government of the French-speaking region of Wallonia, were legal.

Though as much as €4m might have to be refunded, only €1m of that will definitely be repaid, raising the possibility that Ryanair may fare better than expected after further negotiations. This was reflected in the share price, which closed up €0.3 at €4.96.

Ms de Palacio said the impact of the decision could increase ticket prices for travellers by between €6 and€8 for a return journey. Mr O'Leary said that, though price rises could be double that figure, he would rather move some flights from Charleroi to privately owned airports than increase costs to consumers.

But Ryanair will not quit Charleroi completely, and yesterday's ruling seemed designed to allow operations there to remain viable.

The case provoked a fierce debate in Brussels, with Neil Kinnock, the vice-president of the European Commission, among those urging Ms de Palacio not to impede the growth of low-cost travel.

The EU has positioned itself as the champion of budget airlines and has stopped large-scale bail-outs to national flag carriers, allowing the low-cost carriers to thrive. But it is also the guardian of rules designed to prevent governments supporting lame-duck industries with subsidies.

Privately, some of its findings will be viewed with relief by Ryanair, despite its public display of anger. Reduced ground-handling fees worth €4m could, for example, be sanctioned for technical reasons because fewer than 2 million passengers pass through the airport each year.

Nevertheless, the decision has significant implications for a number of other deals between low-cost carriers and publicly owned airports. Many of the Italian, Spanish and French regional airports to which Ryanair or easyJet fly are at least partially in public ownership and some may now consider privatisation. Their deals with airlines are vulnerable to challenge because, owing to their dependence on tax-payers, subsidies given to carriers can count as illegal state aid.

"There is a risk to our operations at all publicly owned airports," Mr O'Leary said. "Our deals are going to be challenged [in the courts] and if I was Alitalia, Air France and Lufthansa I would do the same."

But the decision was welcomed by some of Ryanair's rivals, who said that there would be no impact on their prices.

THE EU'S AREAS OF CONCERN

1. Landing charges of €1 per person (50 per cent of standard rate).

2. Payment to help promotion, worth €4 per passenger over 15 years and for up to 26 daily flights.

3. Incentives for new routes created worth €1.9m, €768,000 to help offset pilot training and €250,000 for hotel costs.

4. Preferential rate of €1 per passenger for ground handling services (normal rates are €8-13).