Wednesday, January 27, 2010

Ryanair Wins Another

The European Commission announced today that it has closed its investigation into Irish low-cost carrier Ryanair's agreement with Slovakia's Bratislava Airport.  See Press Release, Europa, Commission Closes Investigation into Agreement Between Bratislava Airport and Ryanair, IP/10/56 (Jan. 27, 2010) (available here).  From the press release:

The operator of Bratislava Airport (Letisko M.R. Štefánika – Airport Bratislava, a.s.) concluded on 5 December 2005 an agreement with Ryanair until 2016. Following an in-depth assessment after opening the formal investigation procedure, the Commission has now determined that the agreement can be justified by a cost-benefit-analysis. This cost-benefit-analysis provided an assessment of the conditions – in particular the coverage of the costs by the aviation revenue attributable to the agreement - at Bratislava Airport and allows to conclude that in similar circumstances a private investor operating under normal market conditions would have entered into the same or similar commercial arrangement as the airport operator.

In addition the diversification of airlines operating from the airport - and thus the risk reduction – as well as a better allocation of resources and a reduction of overcapacities contributed positively to the operational and financial situation of Bratislava Airport and increased its market value for its shareholders.

Therefore, the Commission concluded that at the time when the Ryanair agreement was signed, it was rational to consider that it would make the management of the airport more profitable.

Despite the victory, Ryanair still remains subject to seven separate Commission investigations concerning its business arrangements with airports across the European Union.  Even so, Ryanair has avoided Commission sanctions before.  In December 2008, the European Court of First Instance struck down a 2004 Commission decision which found that the Irish airline had received illegal State aid from Brussels South Charleroi AirportSee Case T-196/04, Ryanair Ltd v. Comm'n (2009); see also an earlier blog post on the decision here.  Though the CFI's decision was based on the Commission's misapplication of EC competition law rather than a clear legal vindication of Ryanair's controversial strategy of exchanging service to regional airports for so-called "start-up aid," it has allowed the low-cost carrier to maintain its preferred business model.  

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Comments

I am tired of hearing about airlines' problems and how some companies are experiencing profit losses. I just want them to fly on time and stop causing chaos in the skies. I regularly travel on business with BA and I must say, usually the service is great. But other airlines such as Ryanair are frequently late and I have had a number of vacations ruined thanks to their mishandling of my luggage. Many of the lastminute sites listed on www.dozenvacation.com offer better deals than the airlines' direct websites. I just wish that the airline operators can limit their delays so passengers like me do not face any more travel misery.

Posted by: vacations | May 7, 2010 11:37:52 PM

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