Charleroi 'no Waterloo' for Ryanair

A negative ruling from the European Commission on Ryanair's Charleroi deal would not automatically inhibit the airline's growth potential, according to a new report from Merrion Stockbrokers.

The broker contends the result of the Charleroi inquiry will be less important than the "blueprint" for deals with state-owned airports that will emerge at the same time. In a report entitled "Charleroi - No Waterloo", Merrion estimates that a negative ruling for Ryanair could require it to repay up to €26 million in benefits received to date.

The broker has calculated that it could also lead to 11 per cent being shaved off annual profits going forward as Ryanair's costs rise but concludes that such an outcome is unlikely.

Merrion argues that the new blueprint should offer Ryanair sufficient flexibility to "redraw" existing airport agreements in a way that will not damage the company's cost base or growth plans.

Analyst Mr John Mattimoe says Ryanair's shares could be expected to decline in the event of a negative ruling on Charleroi but suggests that a rebound would be in order as soon as the opportunity to renegotiate other agreements became clear.

"We are upgrading our recommendation to buy and would take advantage of any near-term price weakness," Mr Mattimoe writes.