Ryanair ordered to repay €8.5m of illegal state aid

The European Commission has ordered France to force Ryanair to return €8.5m (£7.8m) of support the Irish airline received for using Montpellier airport, which it has ruled amounted to illegal state aid

Montpellier airport served nearly 1.9m passengers in 2018, and Ryanair had a presence there until April 2019.

Following a complaint by a competitor of Ryanair, in July 2018 the Commission opened an in-depth investigation into marketing agreements between the Association for the Promotion of Touristic and Economic Flows (APFTE) and Ryanair and its subsidiary AMS.

This found that between 2010 and 2017, APFTE concluded various marketing agreements with Ryanair and AMS, under which the airline and its subsidiary received payments worth around €8.5m in exchange for promoting Montpellier and the surrounding area as a tourist destination on Ryanair's website.

Commissioner Margrethe Vestager, in charge of competition policy, said: ‘Our investigation showed that certain payments by the French local authorities in favour of Ryanair to promote Montpellier airport gave Ryanair an unfair and selective advantage over its competitors and caused harm to other regions and other regional airports.

‘This is illegal under EU state aid rules. France must now recover the illegal state aid.’

The agreements with Ryanair were financed through state resources and were attributable to the state. APFTE is an association unrelated to the airport operator, funded almost entirely by regional and local French public entities. These public entities closely control the use of the association's budget.

The payments in favour of Ryanair on the basis of the marketing agreements did not correspond to effective marketing needs of APFTE but only served as an incentive for Ryanair to maintain its operations at Montpellier airport, the Commission found.

APFTE either concluded the agreements directly with Ryanair and AMS and not with other airlines or organised public tenders that were biased towards Ryanair.

In the aviation sector, the Commission’s guidelines on state aid to airports and airlines allows public subsidies to be used by regional airports or regional authorities to attract price-sensitive airlines to a specific airport, under certain circumstances. Such subsidies can typically take the form of low airport charges, discounts to airport charges, success fees or incentive payments to airlines as remuneration for alleged services – especially marketing.

However, in principle, such conditions must not go beyond what a profit-driven operator would be prepared to offer under the same circumstances, based on the market economy operator principle. If this principle is not respected, the conditions offered to airlines can amount to state aid.

Ryanair has said it will mount a challenge to the ruling.

Pat Sweet | 06-08-2019

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