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EU: Ryanair must repay some aid

Michael O'Leary
Michael O'Leary, chief executive of Ryanair

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BRUSSELS, Belgium (Reuters) -- Outspoken Ryanair chief Michael O'Leary lost a dogfight with EU regulators on Tuesday when his low-cost carrier was ordered to repay some of the subsidies it receives for flying to Belgium's Charleroi regional airport.

The Irish low-cost airline Ryanair could face a repayment obligation of up to four million euros to Charleroi, the European Commission ruled.

"The reductions granted to Ryanair ... which take the form of a preferential tariff for ground handling services and would not enable the airport to cover its costs in respect of this activity, must therefore be recovered. The amount concerned could be at least four million euros for the 2001-2003 period," the EU executive said in a statement.

The Commission added surplus income to Charleroi airport from commercial activities could reduce that repayment obligation by Ryanair.

O'Leary has said the decision could have a disastrous impact on the new generation of no-frills airlines, which flourished in Europe's deregulated skies.

He warned before the Commission decision that it would drive up prices and dry up the traffic he brought to once-deserted regional airports.

The European Union's executive said it had authorised certain forms of aid which permit "genuine development of new routes under clearly defined conditions."

"However, other direct aid granted by the Walloon Region and partly by BSCA (the Charleroi airport) is imcompatible with the proper functioning of the internal market and will have to be repaid," the statement said.

EU Transport Commissioner Loyola de Palacio told a news conference the ruling " the development of 'low-cost' operations, which are very clearly what consumers want, whilst also ensuring equitable conditions of competition for all airlines."

The Belgian member of the EU executive, Research Commissioner Philippe Busquin, said the decision was fair and there was no reason for the airline to "punish" Charleroi by closing its continential European hub there.

"I think it is a balanced decision," Busquin told reporters, adding that the sum involved was "reasonable."

O'Leary had painted the dispute as a heroic struggle between a company which revolutionised air travel and the dead hand of regulation-mad Brussels bureacrats.

De Palacio insisted all airlines must play by the same market rules on state aid, whatever their size.

The Commission has said its ruling would add only three or four euros to the price of a ticket and and stressed the airline will keep some 75 percent of the subsidies it got.

Ryanair says it will create a precedent that will affect deals struck with other airports.

It has threatened to itself launch complaints and state aid cases against every other airline flying into every publicly-owned airport that offers concessions and discounts.

The Commission has insisted it favours the low-cost industry and indeed helped to create it by promoting deregulation of the EU market and fighting state aid for bloated national carriers.

Ryanair had pursued a vigorous lobbying campaign to avert the decision or get it postponed, lining up the head of the European Parliament, Irish liberal Pat Cox, and regional lobbies.

Copyright 2004 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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