Ryanair battle against state aid could ultimately help rivals

Pandemic support could return former national flag carriers to quasi state control

Ryanair chief executive Michael O’Leary. Photograph: Jonathan Brady/PA Wire

Ryanair chief executive Michael O’Leary. Photograph: Jonathan Brady/PA Wire

 

Ryanair’s battle against government aid for rivals such as Air France KLM, Lufthansa, SAS and others is not over yet. Since last year, the Irish group, Europe’s biggest airline, has railed against €30 billion in aid given to rivals by different states to aid them through the Covid-19 crisis.

On Wednesday, the General Court of the European Union, the second highest in the European Union, ruled that neither tax deferrals allowed to Air France by the French government nor Sweden’s decision to guarantee loans given to Scandinavia’s SAS breached state-aid rules.

Those ban governments or any state agency from giving aid to businesses that distorts normal commercial competition. The EU normally enforces these laws strictly, but the bloc’s treaties allow for support in exceptional circumstances, so the court relied partly on that in its ruling.

Ryanair will appeal this, while it has other challenges on the way, including one against a €9 billion package given to German group Lufthansa. One of the Irish group’s points in its arguments against the Air France and SAS supports is that governments are favouring their former flag carriers, companies that were once state owned, but which are now supposed to stand on their own.

How it will fare in appealing Wednesday’s ruling or in the initial hearing of its challenge to Lufthansa’s deal remains to be seen, but there are potential long-term consequences for air travel and passengers in these deals.

Once the pandemic passes and things begin to normalise, those airlines will remain beholden to the governments that are now supporting them. This will be a golden opportunity for politicians, who will have all the benefits of control and influence, with none of the responsibilities of ownership.

They might argue otherwise, but governments could well switch from paying airlines not to fly, as they are now doing, to telling them where to fly once borders open up again.

One of Covid-19’s more lasting legacies could be that it returns former national flag carriers into a form of quasi state control. Ryanair may well be doing them an unintentional favour by attempting to halt that process now.

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