N79969
Topic Author
Posts: 6605
Joined: Tue Jan 29, 2002 1:43 am

Ryanair And The Charleroi Controversy

Mon Dec 08, 2003 2:04 pm

I have been reading about this and have some questions. I realize that there are other threads but I want to start a real simple and discrete one.

This is my basic understanding of the situation: some airports have paid Ryanair to operate flights and competitors have complained that this unfair on the basis that they cannot obtain the same deal.

Please feel free to correct me if I am wrong.

Are these carriers complaining that they cannot get the same agreements prospectively or that they could not get them at the same time Ryanair negotiated?

If it is former, I think they have no basis to complain. If it is the latter, they have a valid point.

Thanks in advance.

 
BrusselsSouth
Posts: 565
Joined: Wed Aug 15, 2001 2:12 am

RE: Ryanair And The Charleroi Controversy

Mon Dec 08, 2003 4:06 pm

Hi N79969,

In the case of Charleroi (and other similar airports), the problem is that the airport is public owned. So subsidies offered to Ryanair are public subsidies, which I think are considered as illegal government aids (in this case, aids from the regional Walloon government).

For their defense, Charleroi Airport (BSCA) are claiming that the same package of conditions was (and still is) available to any airline wishing to fly from the platform. Those conditions were (according to them) offfered to Virgin Express in the past, and to french LCC FlyEco recently.

Regards
BrusselsSouth
 
LJ
Posts: 4103
Joined: Wed Nov 17, 1999 8:28 pm

RE: Ryanair And The Charleroi Controversy

Mon Dec 08, 2003 8:58 pm

According to EU law any other airline should be able to get the same package of conditions (all benefits) as Ryanair if under an identical situation. However, there is another point and that is that the subsidy may only be given for a fixed (short term) period. Needless to say there is no definition of how long a subsidy may last thus plenty of work for lawyers.
 
bobrayner
Posts: 2038
Joined: Sun Apr 27, 2003 8:03 am

RE: Ryanair And The Charleroi Controversy

Mon Dec 08, 2003 10:09 pm

As I understand it, any other airline that wanted to provide a similar service could step up to the plate. So, why is it unfair?

For comparison - local bus services are usually unprofitable, so the local government has to subsidise them; and they often get better value by paying a private company to do it rather than by doing it in-house. If there is some kind of blanket regulation about public funding of transport services provided by a private operator, you can cancel most local bus services.

An airport authority / local government / whatever is unlikely to see any benefit in offering a subsidy package exclusively to one carrier - they lose any competition. If Ryanair were the only airline capable getting this package, they'd quickly find a way to gouge them; Ryanair would provide a much more competitive service if they know that they're replaceable. Hell, Ryanair might not even be the best airline to meet their needs; why should they keep their options closed?

Local government (&c) is often inefficient, and sometimes corrupt, but I don't think this is an example.
Cunning linguist
 
LJ
Posts: 4103
Joined: Wed Nov 17, 1999 8:28 pm

RE: Ryanair And The Charleroi Controversy

Mon Dec 08, 2003 11:27 pm

For comparison - local bus services are usually unprofitable, so the local government has to subsidise them; and they often get better value by paying a private company to do it rather than by doing it in-house. If there is some kind of blanket regulation about public funding of transport services provided by a private operator, you can cancel most local bus services.

Incorrect, local bus services are all offered in an open bidding proces (and nobody may be excluded from the bidding). The EU regulation is very clear on what is allowed and what not. In the case of Charleroi a few issues (the alledged exclusivity of the contract and the duration of the contract) led the EU to take action after complaints by competitors.

An airport authority / local government / whatever is unlikely to see any benefit in offering a subsidy package exclusively to one carrier - they lose any competition. If Ryanair were the only airline capable getting this package, they'd quickly find a way to gouge them; Ryanair would provide a much more competitive service if they know that they're replaceable. Hell, Ryanair might not even be the best airline to meet their needs; why should they keep their options closed?

There are a lot of reasons to give an exclusive contract to a certain airline. one of it that the airline in question may demand this. It depends soly who is the stronger party the airline or the airport.
 
steph001
Posts: 297
Joined: Wed Oct 08, 2003 8:21 pm

RE: Ryanair And The Charleroi Controversy

Mon Dec 08, 2003 11:41 pm

What about subsidies to other airlines in the EU? I'm not sure about this, but I have an example that looks almost like a subsidized flight. Luxair flies daily LUX-SCN-MUC , where the LUX-SCN leg is only 100 km long (maybe I should post this in the topic about the shortest flight Smile) and I am pretty sure that they don't generate profits on that leg. Do you know if there are subsidies going to Luxair? I just want to add that it looks like Ryanair is not the only subsidized airline and that some High Cost Carriers benefit from subsidies, too.
 
luxair_ca
Posts: 55
Joined: Sat Feb 09, 2002 8:26 pm

RE: Ryanair And The Charleroi Controversy

Tue Dec 09, 2003 4:06 am

may i add something to your post Steph001

Luxair flies this flight, as it takes along a lot of passengers every day from SCN to MUC. It is just like those flights in the US where airlines make a stop somewhere, some Pax board, and they continue...that has nothing to due with subsidizing

thanks
 
N79969
Topic Author
Posts: 6605
Joined: Tue Jan 29, 2002 1:43 am

RE: Ryanair And The Charleroi Controversy

Tue Dec 09, 2003 7:05 am

Thanks to all for the replies. I share Bob's (among others) view on the matter. Although the Charleroi funds may be public, I think a more nuanced viewed of the situation would not treat them as 'subsidies.' Charleroi airport is not keeping a failing business afloat. Those kinds of subsidies are bad and create harmful economic distortion.

Rather it seems that they are paying for a service that generates 'positive externalities' for the region. That is actually a wise use of public funds. If the same incentive package is available to all, then I think the fairness argument is bogus.

My next question is whether competitors are raising a dubious legal challenge to eliminate a competitor? This occured in Dallas, TX when American Airlines tried to restrict Love Field flights to mostly (or exclusivel?) intra-state service in order to protect its DFW hub.

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