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Auditors Question Ryanair Contracts with French Regional Airports

Thursday 02 October 2008

French auditors have raised questions about the terms offered to Ryanair to operate flights from regional airports, but this has not stopped the airline from announcing expansion plans in France.

Regular readers will recollect that several months ago we reported on news that French government auditors in the Dordogne had questioned the legality of the contract between Ryanair and Bergerac airport.

The auditors argued that a ‘marketing’ subsidy of around €500,000 to Ryanair was contrary to European law. They also considered the preferential landing, parking, baggage handling and passenger charging rates agreed with Ryanair to be damaging to the airport accounts.

Well, it seems the temperature is rising on this whole issue, as the French newspaper Le Figaro has recently drawn attention to other contracts between Ryanair and French regional airports where auditors have levelled similar criticisms.

In particular the auditors point to ‘irregularities’ at Carcassonne, Tours, Nimes, Brest, Beauvais, Dinard and La Rochelle relating to the direct and indirect aid given to Ryanair.

Thus, at Tours, in recent years it seems Ryanair obtained around €2 million in assistance, whilst at Carcassonne they received around €4 million in marketing support, to which can be added €3 million in concessionary airport charges. At Nimes around €1 million in marketing assistance has allegedly been provided.

At Rodez between 2004/6 the airline apparently received around €2 million in financial aid, despite the fact that it failed to honour the terms of its contract with the airport. Thus, whilst the contract provided for one flight a day, it seems the airline flew three a week, which went down to one a week in January.

At Poitiers, the auditors failed to be convinced that the airport tariffs negotiated with Ryanair were sufficient to ensure the proper recovery of associated costs. In the absence of the preferential rates negotiated by Ryanair, the auditors argue that the airline should have assumed costs of around €300,000.

It seems Ryanair have also been clever at playing off the regional airports between each other for routes. Thus, Carcassonne was preferred to Nimes for a link to Brussels Charleroi airport by Ryanair because, allegedly, the airline was able to put the two airports into competition with one another for the route.

Ryanair seem to have been equally adept at squeezing the most from them on airport charges. At Biarritz, the auditors stated that, whilst landing charges for a Boeing 737 aircraft were €365, Ryanair managed to negotiate a rate of €62.50, equivalent to an indirect subsidy of €159,000 in a year.

Le Figaro estimate that since Ryanair started flights into France in 2000, it will have received around €100 million in direct aid, not counting the sums involved in concessionary airport charges it has been able to negotiate.

Nevertheless, despite the apparent disgust with which the auditors and Le Figaro view this assistance, it seems the regulatory authorities are not prepared to do anything about it.

To date, the only legal challenges made to the deals have been from Ryanair competitors Air Mediterranée regarding the London-Pau route, and by Brit Air (subsidiary of Air France) in connection with the London-Strasbourg route.

The authorities hold their silence as they know better than anyone that the opening of these routes is extremely important for the wider economic development of the regions of France. Indeed, the French government have made the development of low-cost flights a central part of their tourism development strategy.

Regional politicians and officials are equally concerned to ensure low-costs flights continue as, without them, many of these airports would find it difficult to survive. Prior to the arrival of low-cost flights, Air France was often the only major carrier using the airports, but in recent years they have started to reign in the number of internal flights in France, leaving the airports bereft of a regular service.

The authorities might also be concerned at the risk of retaliation such a legal challenge might provoke, against a country with one of the most protectionist instincts on the planet!

One thing is for sure, none of this is doing anything to intimidate Ryanair, who recently announced an expansion of their flights from their base in Beauvais outside Paris, with new routes to Liverpool, Bournemouth, East Midlands and Barcelona.

Air France are now being taken on in their own backyard by both Ryanair and Easyjet, with other low-cost airlines also keen to develop a slice of this market.

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