Ryanair has been hit with its second illegal state-aid bill in two weeks after it was ordered to repay €300,000 to the German government.
The European Commission ordered the money be returned over Ryanair’s setup at the Alternburg-Nobitz regional airport about 42km south of the city of Leipzig.
But the airline has vowed to fight any negative findings about its agreements which it denied fell outside EU rules.
In a statement today the commission said “certain service and marketing agreements” between the Alternburg-Nobitz airport manager, Ryanair and its marketing offshoot AMS gave the Irish carrier an unfair advantage to the tune of around €300,000.
Ryanair had been the only airline operating scheduled flights out of the airport between 2003 and 2011, when it stopped using the hub.
While the commission gave its tick of approval to most of the airline’s arrangements with the airport manager, it said Ryanair’s 2010 marketing deal “could not have been reasonably expected to improve the financial situation of the airport” which meant it amounted to illegal state aid.
It said the contracts had no chance of returning a profit for the airport even in the long term and they gave the airline an unfair economic advantage.
Deja vu, all over again
The latest ruling follows another European Commission decision earlier this month when Ryanair was told to pay back €500,000 to the German government for its contract at the Zweibrücken Airport.
The airline was cleared over its arrangements at four other airports, but the commission said its Zweibrücken contracts amounted to illegal state aid.
Ryanair said it planned to appeal both decisions, even though the repayments represent a drop in the ocean for the world’s busiest budget carrier.
“All of Ryanair’s airport arrangements comply with the EU State aid rules and Ryanair has therefore instructed its lawyers to appeal this ruling to the extent it alleges otherwise,” a spokeswoman said.
The company recently announced it expected its year-end profits to reach up to €650 million.
EU orders Germanwings, Ryanair and TUIfly to repay large sums for subsidies wrongly obtained
1.10.2014In February 2014 the European Commission adopted new guidelines on how Member States can financially support airports and airlines in line with EU state aid rules. The aim is to ensure fair competition. The aim is to avoid overcapacity and the duplication of unprofitable airports, or support for an airport that is too close to another. Aid is allowed if there is seen to be a genuine need for accessibility by air to a region, to help economic growth. Many low cost airlines have derived benefit from subsidies to airports, and now a number are having to make repayments for money they should not have obtained. The EU has confirmed that Germanwings must pay €1.2 million, Ryanair €500,000 and TUIfly €200,000 that they got from Germany’s Zweibruecken airport, in the form of lower fees. Zweibruecken is only 25 miles from Saarbruecken airport. Brussels Airlines separately faces an EU probe into €19 million that airlines at Belgium’s Zaventem airport received from the state to fund operating costs from 2014 to 2016. And there are other cases. Belgium’s Charleroi airport must give back €6 million in aid.
Consultation on rules for European Commission state aid to airports and airlines
Under the European Commission, state aid is granted to various sectors of the economy. However, a key issue is the impact it has on distorting the market, and giving an unfair advantage to those companies or organisations receiving it. Airports and airlines are one sector that receives large amounts of state aid through the EC. The Commission’s DG Competition is tasked with overseeing state aid. There have been earlier sets of guidelines on state aid to airports and airlines, but there is a current consultation – due to end on 25th September (which may be extended). The exact amount of state aid given to the aviation sector is somewhat shady, but is at least €3 billion, for those subsidies that are fully notified.There have been widely publicised cases, such as that of Ryanair at Charleroi airport. Transport & Environment have produced an easy-to-read briefing on the state aid situation, and people are urged to respond to the consultation. The state aid gives the aviation industry unmerited subsidy, and helps to encourage very high carbon travel.
European Commission Commission adopts new guidelines for state aid to airports and airlines
The European Commission has now adopted new guidelines on how Member States can financially support airports and airlines in line with EU state aid rules. The EC says the guidelines are “aimed at ensuring good connections between regions and the mobility of European citizens, while minimising distortions of competition in the Single Market.” The aim is to ensure fair competition for flag carriers down to low-cost airlines, from regional airports to major hub airports and avoid overcapacity and the duplication of unprofitable airports. Aid is allowed if there is seen to be a genuine need for accessibility by air to a region. Operating aid to regional airports (with less than 3 million passengers a year) will be allowed for a transitional period of 10 years under certain conditions, in order to give airports time to adjust their business model. Airports will less than 700 000 passengers a year get more favourable treatment. Start-up aid to airlines to launch a new air route is permitted provided it remains limited in time. The formal adoption of the new guidelines in is expected by March 2014.
European Commission to clarify state aid to airports – making ineligible those with over 3 million passengers per year
Across Europe, State aid to small regional airports has until now been ambiguously regulated by measures that date from 1994 and 2005. Much of the aid has probably been illegal, because it has been operational aid that is used to subsidise airport fees for airlines. These savings are then passed on to customers – subsidising their flights. Budget airlines such as Ryanair have taken advantage of this situation and made a lot of profit on it, as well as encouraging artificially cheap air travel. The European Commission is now to produce new guidelines on state aid to airports and airlines, to be publicised on 19th February. The Commission has 50 pending cases of suspected violations of state aid rules, but none has been acted upon for fear of forcing small airports to close. Large airports and airlines have complained that they are being put at a disadvantage by subsidies to their smaller competitors. It is likely that the new guidelines will only allow state aid for 10 years from now, and introduce a threshold so airports with over 3 million passengers per year are not eligible. Environmental campaigners are angry that the guidelines will legitimise a previously illegal practice. It will cause a growth in air travel, contrary to the aim stated by the EU’s white paper on transport of moving passengers from air to rail.
Bankrupt Alitalia to get € millions of state aid from Italy’s state postal service
The near-bankrupt Italian airline Alitalia is to receive an emergency capital injection from Italy’s state-owned post office. Italy’s government did not say how much Poste Italiane SpA, the Italian postal service, would be investing – but it might be up to €100 million. The Italian government hope the link between Poste Italiane and Alitalia would lead to a synergy of logistics, in passengers and cargo. Italy’s civil aviation authority had warned just hours earlier that the airline risked being grounded if new financing was not found urgently. Alitalia needs some €455 million to stay afloat. The Italian government justified what amounted to state intervention saying Alitalia was considered a national asset. It filed for bankruptcy in August, as high staff costs, industrial relations issues and surging oil prices further dented its finances. It is being suggested that Alitalia might be able to merge with Air France-KLM to help get it out of its financial problems. Alitalia went bankrupt in 2008, and was re-launched in 2009.
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