Ruling on Ryanair threatens spread of budget air travel

Click to follow

The future of no-frills flying throughout Europe is at stake today as the European Commission rules on a case involving the budget carrier Ryanair and its flights to a small airport in southern Belgium.

The city of Charleroi, one of Europe's worst unemployment blackspots, is anxiously awaiting the ruling which could prompt the Dublin-based airline to leave its tiny airport.

The commission is likely to order Ryanair to pay back between €2m and €7m (£1.4m and £4.8m) it received in subsidies from the government of Wallonia, the French-speaking region of Belgium.

The ruling could affect all low-cost airlines that fly to publicly owned regional airports.

Charleroi, in decline since the demise of its traditional coal and steel industries, could never have dreamt of marketing itself as a destination for tourists or business travellers. But the arrival in 1997 of Ryanair, which rebranded the airport as "Brussels-South", offered the city an unexpected opportunity to regenerate itself.

Yesterday Pat Cox, president of the European Parliament, appealed to the commission to look at the big picture, including the need to regenerate depressed regions and drive down prices for consumers. "Whatever decision is taken it must not lead to unforeseen, unplanned and potentially unwelcome side-effects," he said.

Michael O'Leary, Ryanair's pugnacious chief executive, has warned that the ruling could lead him to pull out of Charleroi, and threatened to launch complaints against rival airlines and publicly owned airports for striking similar deals as he did in Belgium.

Though some see this as a bluff, there is no lack of anxiety in Charleroi, 30 miles south of Brussels, where the airport has boomed since the arrival of the Dublin-based carrier. Nearly 700 jobs have been created at the airport and as many as 2,600 indirectly. At the airport itself a new cafeteria has been constructed and hire-car companies have opened.

With a success on its doorstep the city has started to shrug off its image as a centre of crime, drugs and joblessness.

Martial Dumont, spokesman for the city, said: "In 1995 Charleroi handled 41,000 passengers, in 2003 it was 1.8m. Passengers using the airport spend money there, and some stay in Charleroi. In addition to the jobs that have been created, the presence of Ryanair gives Charleroi direct links with cities like Dublin, London and Carcassonne, cities which our population can visit for a very low price. We hope there is a solution that will allow Ryanair to stay at Charleroi."

Mr O'Leary argues that the commission is challenging its ability to negotiate deals that can bring down ticket prices for all. But the commission is the guarantor of the EU's strict rules that prohibit governments propping up industries with subsidies. It is concerned that the owner of Charleroi's airport, the region of Wallonia, used taxpayers' money to fund the lower charges for Ryanair, in effect subsidising it. It is also investigating whether the deal offered to Ryanair was declared openly, and whether rules were broken by making it available to one carrier exclusively.

The case raises complex issues because nearly all airports have benefited from public investment at some point in their construction, even if they have now been privatised.

Mr O'Leary has said the deal with Charleroi was no different to those with privately owned airports, which make money from passenger spending at shops and car parks.