Commission to investigate Ryanair subsidies

The European Commission is expected today to initiate a formal investigation into subsidies enjoyed by Ryanair at its Belgian hub, Charleroi.

The investigation by the Commission's transport directorate general follows an informal inquiry during the past year into subsidies used by Brussels South Charleroi Airport to attract business. The airport is one of two European hubs operated by Ryanair.

The other is at Frankfurt-Hahn. A third near Milan will open next February. EU regulators will seek to establish whether the conditions offered to Ryanair at Charleroi amount to illegal state aid by funnelling public money into the carrier in an unfair way.

The airport is majority-owned by Sambrinvest, a company promoting regional development in the French-speaking region of south Belgium.

Regulators in the Commission are said to be particularly shocked by arrangements through which they believe the regional government offers a 50 per cent discount on landing fees and the airport offers even bigger discounts on handling fees. Ryanair said last night it was not aware that an investigation was imminent.

"Ryanair has no concern about any formal or informal inquiries made by the EU into our successful operations at Brussels Charleroi," the airline's spokeswoman said.

She added: "The general terms of our cost base at Charleroi airport are well known and are available to any other airline that chooses to fly there on a similar basis as Ryanair." The arrangements at the airport were "competitive, non-discriminatory and available to all".

The investigation will come as part of a general drive against subsidies to European airlines, which the transport commissioner, Ms Loyola de Palacio, argues distort competition and maintain the fragmentation of the EU aviation sector, which she believes has too many loss-making flag carriers.

Charleroi has trebled its number of scheduled flights to 7,700 last year, following Ryanair's arrival. The regional government offers a 50 per cent discount on landing fees, and the airport offers even bigger discounts on handling fees.

The Commission is understood to believe that the same terms, and the same public money, have not been made available to other users of the airport. These include the former Aer Lingus subsidiary Futura, in addition to Virgin Express, British Midland, Turkish Airlines and Air Algerie.

The Commission is expected to underline its position by announcing a "final" authorisation for the Italian government to underwrite war-risk insurance that ended in October. It is is also likely to call Olympic Airways to repay €194 million in "aid" to the Greek government. This could lead to the bankruptcy of the state-owned Greek carrier. - (Financial Times Service)