Low cost fares to rise as decision goes against Ryanair
RICHARD CARTER
03.02.2004 @ 16:59 CET
EUOBSERVER / BRUSSELS - Passengers flying with low-cost airline Ryanair face a price hike of six to eight euros per return ticket, the European Commission said today, as it ruled that discounts received by the airline from its hub in Charleroi were illegal.
EU transport commissioner Loyola de Palacio said today that Ryanair had received 15 million euro in subsidies.
The Commission considers some of these legal since Ryanair has also invested heavily in the Charleroi region - known as "cross investment".
But a part of the subsidies were "incompatible with the functioning of the internal market", according to Ms de Palacio, and therefore must be paid back.
Overall, 70-75 percent of the subsidies were permissible and Ryanair will have to pay back the rest - an estimated four million euro.
However, this is considerably less than most analysts had thought likely and Ryanair shares rose sharply on the news.
The Commission was keen to stress that the decision was made in the interest of consumers. The ruling would help the "development of 'low-cost' operations, which are very clearly what consumers want, whilst also ensuring equitable conditions of competition for all airlines", said a Commission statement.
Bizarre ruling
But Ryanair's combative Chief Executive Michael O'Leary slammed the decision, describing it as a "bizarre" ruling.
He said, "We consider this decision to be a disaster for consumers and for low-cost air fares all over Europe".
The decision was a "meaningless interference in the free market", he added, and "an attack on all low fare airlines".
Commenting on the price hike of six to eight euros, he said that half of tickets from Charleroi airport were under ten euros anyway. Therefore the price hike was, in effect, a doubling of the price.
Mr O'Leary confirmed that he would be appealing to the European Court of Justice and warned that consumers may lose "some flights, some routes". He has previously threatened to pull out of Charleroi if the ruling went against Ryanair.
Valuable service
Meanwhile, the European Consumers' Association said that it hoped Ryanair would continue to benefit consumers with its low cost policy.
Jim Murray, the Director of BEUC told the EUobserver, "BEUC believes that low cost companies will survive. Ryanair has performed a valuable service for European consumers by offering cheaper air-fares and by forcing other airlines to lower their fares. We hope it will continue to offer more and better services for a long time to come".
