Ryanair Eyes Legal Action Against European Airline Bailouts

Advertisement:

Ryanair is stepping up its campaign against state aid for airlines. The Irish low-cost carrier has long complained state aid gives favored airlines an unfair advantage. Now, Ryanair is taking its complaint to the courts. The airline is challenging European Commission authorizations for state aid directed to SAS, Finnair, TAP, Air France, KLM, and Lufthansa.

Ryanair-eu-airline-bailout-action
Ryan is taking the European Commission to court over aid it approved to competitor airlines. Photo: Ryanair Newsroom

Multiple court appeals by Ryanair target specific state aid

Ryanair has launched six appeals in the European Court of Justice, each targeting specific events of state aid provided to six airlines. Ryanair isn’t taking the individual airlines to court. Rather, the airline is taking the European Commission to court. But the state aid provided to the six European airlines is behind Ryanair’s challenges.

Stay informed: Sign up for our daily aviation news digest.

Regarding Finnair, Ryanair is challenging the May 2020 state guarantee provided to the airline. That guarantee covered 90% of a US$711 million loan granted to the airline by a pension fund. SAS is in Ryanair’s sights because of EU endorsements provided earlier this year to Denmark and Sweden to support SAS and compensate for the damage caused by the travel downturn.

Ryanair’s beef with TAP concerns an EU decision in June to allow Portugal to provide over US$1.4 billion in aid to its distressed national carrier. France got the go-ahead to suspend the payment of aeronautical charges in March. While Air France isn’t the only French airline that benefits from that decision, it’s Air France that’s cited in Ryanair’s legal challenge.

Ryanair-eu-airline-bailout-action
Lufthansa is one of six airlines Ryanair is targeting over EU approved state aid. Photo: Lufthansa Newsroom

Well positioned low-cost airline puts the squeeze on legacy competitors

Ryanair has noted more appeals may get filed as the EU makes more decisions. Ryanair argues that state aid unfairly penalizes those airlines not on the receiving end. Notably, it forces airlines like Ryanair to lower prices further, something they can ill-afford to do in the current environment.

Advertisement:

Or can it? Despite Ryanair’s aggression, they are one of the best-positioned airlines in Europe. In terms of liquidity as a percentage of annual revenue, Ryanair is second only to Wizz Air among Europe’s biggest carriers.

According to CAPA data, in March this year, Ryanair’s liquidity as a percentage of 2019 revenue was 170%. While not all that liquidity gets held in cash, Ryanair’s revenue in the year to March 31, 2020, was over US$10 billion. In contrast, the airline’s in Ryanair’s legal sights have far less liquidity. Air France / KLM’s liquidity as a percentage of 2019 revenue was 81%. Lufthansa and SAS’s liquidity as a percentage of 2019 revenue was 51%.

Advertisement:

While it’s not on the receiving end of EU approved aid, Ryanair is one of the strongest airlines in Europe. But the airline is giving no quarter to its competitors.

Ryanair-eu-airline-bailout-action
Ryanair boss has not said much about his latest court challenge. Photo: Ryanair Newsroom

Business as usual while appeal gets heard

Ryanair’s legal challenge doesn’t immediately impact the provision of state aid to the nominated airlines. For the time being, it’s business as usual. The European Union appeals process is long and convoluted. The initial appeal gets held in the General Court of the European Court of Justice. This appeal can take over 12 months to get heard. That decision, when made, can be further appealed to the higher court at the European Court of Justice.

Unusually, Ryanair isn’t saying much about its legal maneuverings. It’s CEO, Michael O’Leary, had famously likened Lufthansa to a junkie addicted to crack cocaine when it came to state aid. Now the airline is taking its argument to the European Union courts, the rhetoric may be toned down. But it’s clear Ryanair is coming on as aggressively as ever.

Advertisement:
5 Shares: