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Ryanair-Bergerac Contract May Not Be Legal

Thursday 01 May 2008

French Government auditors have questioned the legality of the contract between Ryanair and Bergerac airport.

The Dordogne Chambre des Comptes is a regional office of the national Cour des Comptes, the influential quasi-judicial auditing arm of the French State.

In a report on the functioning of the airport at Bergerac in its relations with low-cost airlines the Chambre expresses concern that a ‘marketing’ contribution of around €500,000 a year made by the airport to Ryanair is little more than a disguised subsidy, contrary to European legislation.

The contribution from the airport is a fixed sum based on the number of passengers that Ryanair brings to the airport. The auditors consider that there is a lack of transparencyfrom either Ryanair or the airport as to how this marketing contribution is spent.

They also seem particularly aggrieved that the contract provides that the country of legal jurisdiction in the event of dispute is the UK, something which they consider seriously undermines the ability of the airport to defend its interests, and which they consider is probably also contrary to European law.

Their remarks are expressed within the context of concern about the continuing significant deficits being incurred by the airport.

In 2001, the airport incurred losses of around €185,000, a figure that had risen to over €500,000 in 2006, in the main because of the additional costs the airport had to meet for customer service, security, and safety requirements.

Thus, whilst revenues went up from around €700K to €4m a year, costs rose even faster.

The airport has been unable to cover these additional costs from the low-cost airlines, simply because of the preferential landing, parking, baggage handling and passenger charging rates that had been negotiated, firstly by Buzz, and then later by Ryanair and Flybe.

By way of example, the Ryanair contract provides that the first two hours of parking of the aircraft are free. Given that the business model of Ryanair is predicated on keeping aircraft in the air as much as possible, very few parking fees are paid.

Nevertheless, despite the criticism, the auditors do acknowledge the benefits brought by the contract, notably in terms of the wider economic benefits to the region, and the jobs created at the airport itself.

In 2001, prior to the inauguration of flights from London by Buzz airline, the airport received 16,000 passengers per year. By 2006, it had risen to 270,000, due entirely to low-cost flights from Ryanair and Flybe. In summer, the airport is served from no less than 10 towns and cities in the UK.

As we reported in a recent Newsletter, these low-cost traffic increases are also reflected in other airports right across France.

Low-cost airlines are the only aircraft that now land at Bergerac airport, with Air France having withdrawn its domestic service to Paris several years ago.

The auditors do not consider that the on-going subsidies to cover the airport losses made by the State, the local commune and the Chambre de Commerce cause any legal difficulty.

Neither do they seem to think that the subsidies the French Government grant to Air France for running routes which they consider to be a ‘public service' contrary to European regulations. This is not a view held by Ryanair, who have lodged a complaint in the European Court against Air France contesting the legality of these subsidies. It would, of course, be churlish to think that the Chambre report was tit-for-tat!

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