Thursday, December 27, 2007

Ryanair and the EU ...

Michael O'Leary, the charismatic boss of Ryanair, is an angry man. Reacting to the multiple legal actions taken against its low cost aerial company, he didn't hesitate to accuse EU's institutions of corruption.

Well, a honeymoon between Ryanair and EU isn't for tomorrow. Proof is that all available actions against Ryanair have been tried, especially the ones for receiving illegal allowances from airports managements, while all actions taken by Ryanair against other companies for the same reasons (Alitalia, Lufthansa, Air France) have not.

Yet Ryanair keeps on growing, despite all endeavours to pull it up short. Ryanair employs 4,800 people and is Europe most profitable carrier. In 2008 the number of passengers is expected to overtake British Airways' worldwide total.

O'Leary's USP is simple: low fares. Ryanair's average ticket costs €41 (£27), compared to €62 (£41) on easyJet, or €268 (£178) on British Airways.

The EU's attitude towards Ryanair is more than questionable. Perfect example is the merger between Ryanair and Aer Lingus. The EU anti trust authorities rejected in June Ryanair's takeover bid for rival Irish carrier Aer Lingus, ruling that a combined operation would create a Ryanair monopoly in Ireland.

Yet the EU in this decade has approved a string of other European mergers involving Air France, Dutch carrier KLM, Lufthansa and the defunct Swissair. Clearly there is a double standard: the European Commission refuses a merger for "local reasons" while weeks before, it approved the merger of four big companies operating all over Europe. Indeed, the same logic wasn't applied when the merger Thomas Cook/ My Travel and TUI/ First Choice was approved, creating a real monopoly over seaside resort tourism within Europe.

With regard to Ryanair and Aer Lingus, O'Leary claims the move is politically motivated and is made to appease politicians in Dublin. The Ryanair boss says he will appeal against the expected decision at the EU's Court of First Instance.

He says "This decision is politically motivated, designed to appease the narrow interests of the Irish government, which was the only party, other than Aer Lingus itself, to object to the merger," O'Leary told media sources.

Ryanair has been subjected to a series of EU investigations into its deals with far-flung, small airports, most recently when investigators began probing whether Ryanair's exceptionally cheap contracts with three airports in Germany and Finland violated competition laws. The EU is also looking into Ryanair's contracts with airports on the Mediterranean islands of Sardinia and Malta.

But while Ryanair is investigated, Michael O'Leary only gets refusals when requesting other companies to be investigated for the same reasons. So Ryanair is suing the European Commission over its refusal to conduct a probe into German government funding for a Munich airport terminal, whether it amounts to illegal state aid for Lufthansa AG.

For the past two years Ryanair has accused European leaders of demonstrating bias in favor of the continent's national flag carriers, citing a range of government financial support, benefiting Lufthansa, Air France, Alitalia and Olympic Airways of Greece.

O'Leary said Lufthansa and its partner airlines enjoyed "exclusive use" of the terminal, which was built with more than €1 billion (US$1.4 billion) in state aid. He said the terminal had run up losses exceeding €100 million (US$140 million) annually.

"No private investor would have invested in the loss-making facility and then granted exclusive access to just one airline. Lufthansa is therefore receiving substantial state aid at Munich Airport, which distorts competition in the European air transport market," O'Leary said.

"Munich Airport's refusal to allow Ryanair to use this facility has subjected passengers in Bavaria to the stranglehold of Lufthansa's high fares and fuel surcharges," he said. Ryanair mounted a similar lawsuit last week against the European Commission, alleging it has ignored a previous Ryanair complaint against French government policies that allegedly favor Air France. That lawsuit was also filed in the European Court of First Instance.

"The French government's operation of massively discounted domestic airport fees in France — almost all of which supports Air France — amounts to approximately €1 billion (US$1.4 billion) of illegal state aid benefiting Air France, yet the commission has refused to do anything about this for the last eighteen months," O'Leary said.

Ryanair also applied to the regional administrative Court in Lazio, Italy for an immediate injunction to overturn the recent unlawful attempt by ENAC (the Italian civil aviation Authority) to restrict capacity at Rome Ciampino Airport by almost 30% from November 2007.

The Irish airline says that in so doing, the Italian authorities are trying to support the terminally ill Alitalia by blocking low fares and competition in Rome. Ryanair has also submitted a complaint to the European Commission, asking it to immediately intervene on behalf of consumers to prohibit this unlawful reduction of capacity at Rome’s secondary airport.

When asked if he was not considering buying Alitalia, O'Leary answered that he was not interested, even for free! Too much trade union and political influence over this company, he said. And he has a point.

What we see with Ryanair is the evil role played by the EU. While the worst performing companies get protection, the best are taking a beating. The EU prefers spending time and money to keep ill managed carriers afloat, instead of encouraging brilliant businessmen.

And what about European citizens! Their tax money is wasted, while the EU tries to force them into expensive air travel!

The EU: ill advised, incompetent, corrupt, an illegal super state.

- Filed on Articles in "The Economics and Monetary Dossier", cat. Economics -


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