Ryanair shares fall on signs of bad Charleroi outcome

Ryanair's shares tumbled yesterday after the airline said it expected "substantial parts" of its low-cost relationship with Charleroi airport to be ruled illegal by the European Commission.

"Apparently there are significant portions of our arrangements for Brussels-Charleroi in the draft that are deemed to be found unlawful," said Ryanair chief executive, Mr Michael O'Leary.

He vowed to fight any such finding in the European Court of Justice and warned that this could lead to the temporary closure of the Charleroi facility and the transfer of flights to an unnamed location.

Smaller airline, Virgin Express, responded to this threat with an offer to replace Ryanair at Charleroi if the opportunity arose.

Mr O'Leary said Ryanair would also enter talks with the Belgian regional Walloon government, which controls Charleroi, on a possible privatisation of the airport and the establishment a new low-cost arrangement there.

The Walloon government has previously said that it hopes to sell a 49 per cent stake in the airport before the end of the year, but economics minister, Mr Serge Kubla, has since hinted at a further privatisation, a spokeswoman said.

A spokesman for the European Commission said meanwhile that a final ruling on Charleroi had yet to be made.

"We have until June 2004 to take a decision. We're intending to take a decision in the coming weeks but I don't think it will be before the end of November," the spokesman said.

Ryanair's warning came as a surprise to the market, with the airline's previous statements on the matter expressing confidence on a positive outcome.

The company's shares ended down almost 4 per cent at €6.56 in heavy volume.

Mr O'Leary said the change in the airline's tone was attributable to "feedback" emanating from the Commission. He said a draft decision on the Charleroi issue, which has not been seen by Ryanair, was in circulation.

A negative ruling could have wide consequences for Ryanair's dealings with other publicly-owned airports, which account for 18 per cent of Ryanair's traffic, because it would almost certainly spin off multiple "copycat" suits, according to Mr O'Leary.

He claimed that this would not affect the airline's growth strategy over the coming five years. - (Additional reporting, Reuters)