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Ryanair Wins EU Court Ruling On Belgian Airport Fees

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Ryanair Holdings Plc, Europe’s biggest discount airline, may be able to benefit from discounts offered by regions to attract the carrier to second-tier airports after a European Union court upheld its challenge of an EU veto.

The European Court of First Instance in Luxembourg today annulled a 2004 decision by the European Commission that canceled Ryanair’s accord with state-owned Charleroi airport in Belgium. Under the accord, the carrier paid less for landing fees and ground services.

The ruling is “great news for Charleroi, competition, consumers and low-cost airports across Europe,” Michael O’Leary, Ryanair’s chief executive officer, said in a statement today. The company will call on the commission to drop its pending probes of other airports, he said, and it’s time the two “stop fighting.”

At stake today was Ryanair’s ability to strike agreements with secondary airports that are seeking to boost regional development with more flights and passengers. The Dublin-based airline’s success has irked flagship carriers concerned about losing customers at major airports.

“It’s helpful as far as it goes because Ryanair does do deals with a number of other regional airports, and the more freedom it has to do these deals, the better,” said Douglas McNeill, an analyst at Blue Oar Securities in London.

Probes pending

The Charleroi case is the most prominent in a series of disputes between the EU and Ryanair. The commission has probes pending against eight other small airports operating with Ryanair, including in Denmark, France, Germany and Italy.

The commission “will need to study this further” before commenting in detail, spokeswoman Pia Ahrenkilde-Hansen told reporters at a press briefing in Brussels today.

“As far as we see it, this judgment does not have an impact on the other cases,” she said. The ruling “looks at the methodology of the commission’s approach rather than commenting on the substance of the private investor test.”

Ryanair gained 10 cents, or 3.6 percent, to 2.90 euros in Dublin trading. The company’s stock has fallen 37 percent this year, reducing its market value to 4.27 billion euros ($6.14 billion).

The commission had rejected Ryanair’s reduced landing fees at Charleroi airport, 56 kilometers (35 miles) south of Brussels, curbed discounts for ground services, limited other benefits to five years from 15 and ordered Ryanair to repay 4 million euros in aid.

Refusal

“The commission’s refusal to examine together the advantages granted by the Walloon region and by Charleroi Airport, and to determine whether, taken together, those two entities acted as rational operators in a market, is vitiated by an error of law,” the court ruled today.

Jim Callaghan, Ryanair’s director of legal and regulatory affairs, in an interview at the court today called it a “vindication for Charleroi airport.”

“Charleroi airport has been profitable each year for the past six years, which disproves the commission’s original claim that Charleroi would be loss making for the term of the Ryanair contract,” O’Leary said. “They have built a new low cost terminal, based on the success of their agreement with Ryanair, and now other airlines are serving Charleroi as a result.”

The Brussels-based commission in 2005 drew up new state-aid guidelines for airports to codify the basis of its Charleroi decision. The guidelines set out the conditions under which airports can receive public financing and offer airlines startup benefits.

Low-cost model

Ryanair, which says it pioneered the low-cost business model in Europe, lowers costs partly by operating from smaller airports. Before 1997, when Ryanair started its first route to Dublin, Charleroi airport had about 30,000 passengers a year compared with about 2.5 million today, according to Ryanair.

“Today’s decision is hugely important” and “clarifies that the low-cost airports model works,” Callaghan said.

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