Assignment
Ryanair and Charleroi The wide-ranging problems resulting from EU rulings on the legitimacy of state aid and subsidies is usefully illustrated by the recent experience of Ryanair, the Irish carrier. In February 2004 the European Commission ruled that Ryanair had received around £11m (e15m) in state aid from the Belgian authorities to fly to and from Charleroi airport in southern Belgium and ordered the no-frills airline to return up to £3m (e4m) of the money. According to the judgement, Ryanair's controversial benefits from the Walloon regional government which owns Charleroi included e1.92m in subsidies to launch new routes, e768, 000 for pilot training, e250,000 towards hotel costs and a landing charge of only e1 per passenger, compared to the standard rate of e8 to e13. Loyola de Palacio, the EU transport commissioner, said she thought the ruling would force Ryanair to put up its prices by an average of up to e8 (£6) per return ticket but Mr O'Leary, Ryanair's owner, said it was likely to be double that. The ruling is also expected to affect Ryanair's cut-price fares to other destinations since it has similar subsidy arrangements with 19 state-owned airports in France which include popular second-home destinations for British travellers such as Montpellier, Biarritz, Carcassonne and Pau. Ms de Palacio made it clear that some forms of aid were acceptable, including oneoff help from airports to provide marketing support for new routes. She also indicated that introductory discounts for new airlines could be acceptable for up to five years, rather than the 15 years agreed at Charleroi. The ruling is only applicable to state-owned airports, which means that destinations in countries such as Britain and Germany, where airports are privatised, will be unaffected. The European Low Fares Airline Association, which represents nine low-cost carriers, also criticised the European Commission ruling. The AEA's secretary general, Ulrich Schulte-Strathaus, said: ‘Are we expected to believe that there is a natural market at Charleroi that can support three Boeing 737 services a day to London, and two a day to Venice? The Charleroi routes only make economic sense if, firstly, they are represented as serving Brussels and, secondly, they are supported by subsidies.'
Question
1 Why have the regional governments owning these airports been willing to offer such aid and subsidies to Ryanair?
2 What is the European Commission's attitude to such aid and subsidies?
3 Consider some of the implications that might follow from this ruling against Ryanair.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.