Ryanair has a message for any airlines taking government rescue money — we’ll see you in court.
As governments across Europe open their purse strings to help struggling airlines, Ryanair is loudly complaining that those rescues violate the bloc’s state aid rules.
Lufthansa is in talks for a bailout of more than €10 billion for it and its subsidiary carriers; Air France has received €7 billion from the French government while its partner airline KLM is looking for aid from the Netherlands. Nordic countries have put out hundreds of millions for SAS Scandinavian, and the German government is doing the same for Condor.
Ryanair CEO Michael O’Leary told POLITICO on Tuesday that his company is working on taking every one of those deals to court. By the end of the summer, he said Ryanair would have filed between 10 and 15 cases with the Court of Justice of the EU.
Referring to Lufthansa’s negotiations with governments in Belgium, Austria, Switzerland and Germany, O’Leary said, “They’re like drunks at a wedding, hoovering up the alcohol … They’re just hoovering up state aid to give them unlimited firepower to distort the competition market once we’re all back flying again.”
“If you’re an airline like Lufthansa and Air France and you’re having your payroll paid for by the state, you don’t need another €9 billion to €10 billion of doping” — Michael O’Leary, Ryanair CEO
While many of Ryanair’s competitors have thin margins and high costs, the discount carrier had €4 billion in cash reserves when it grounded most of its fleet in March, and said it was confident it will come out of the crisis without government cash injections. It is currently negotiating a cut to its plane deliveries, and in talks with unions to lay off around 3,000 workers.
The Ryanair chief has said in the past that he doesn’t have much faith in the Commission being an effective arbiter, but now he’s relying on EU courts to fix what’s wrong.
“I don’t think we’re going to convince the European Commission. I think what we’re going to require is European courts to uphold the rule of law against what are clearly nakedly political, corrupt decisions being made by the European Commission to approve what is blatantly illegal state aid,” he said.
The company has already filed two complaints with the Commission: one against Sweden’s €455 million scheme to assist the airline sector, and another against France’s tax-deferral scheme for its airlines, which would push back aviation taxes for 2020 to next year. Ryanair was excluded from both schemes because it carries neither a Swedish nor a French operating license — a condition O’Leary said is discriminatory under the EU’s single market rules.
“We expect the European Commission to be the fair regulator, to referee the level playing field fairly, not to allow the French and Germans to do whatever it is they want to the damage of everybody else.”
In the case of the French tax deferral program, Commission Executive Vice President Margrethe Vestager quickly approved the bailout and the Commission said that “exceptional interventions by the Member States to compensate for the damages linked to the outbreak are justified.”
O’Leary’s main concern is that bailouts won’t be used to maintain essential operations, but will fund cut-price tickets to compete with Ryanair when planes start flying again.
“If you’re an airline like Lufthansa and Air France and you’re having your payroll paid for by the state for the next two or three months, you don’t need another €9 billion to €10 billion of doping on top of that,” he said. “That’s your biggest outgoing for the next couple of months taken care of. What do you need the billions in state aid for, other than to damage and distort competition for probably the next five to 10 years?”
He’s not the only one worried about such possible consequences. Spanish Economy Minister Nadia Calviño said the bailouts could lead to a very different airline industry once the coronavirus crisis is over.
“We are strongly defending that we would provide a level playing field and, with different sorts of support, provide a similar level of funding and similar level of credibility and strength to the different operators so that we do not create competition problems at the end of the day,” Calviño told Bloomberg this week.
“The European Commission is keeping a very close eye to make sure there is no breach of the competition rules and that we don’t end up with a very unlevel playing field because of the different capacity of government to support the different airlines,” she added.
British Airways got a £300 million loan and easyJet got £600 million from the U.K.’s Covid Corporate Financing Facility.
There is a great variation in bailouts.
The U.K. has been reluctant to reach bespoke agreements with airlines, requiring them to exhaust all other means of liquidity before negotiating a rescue. Regional carrier Flybe folded without government intervention in the early days of the crisis, and both British Airways and Virgin Atlantic are slashing staffing and cutting routes.
France is being much more proactive, deferring millions in taxes and paying airline employees through a furlough scheme in addition to the €7 billion direct loans and loan guarantees to Air France, a company French Economy Minister Bruno Le Maire called “a part of our industrial heritage.”
O’Leary said Ryanair, easyJet and International Airlines Group (the owner of British Airways, Iberia and Aer Lingus) don’t have access to the same generosity. “The Irish government is not going to provide state aid to Ryanair or Aer Lingus. The U.K. government is not going to provide state aid to British Airways. The Spanish government is not going to provide state aid to Iberia or Vueling, so we don’t have the luxury.”
That’s not to say they are getting no help.
EasyJet and IAG have both taken part in government loan schemes. British Airways got a £300 million loan and easyJet got £600 million from the U.K.’s Covid Corporate Financing Facility, a scheme available to any company that had a solid credit rating before March 1. IAG’s other airlines Iberia and Vueling got €1 billion in state-backed bank loans from the Spanish government under a similar scheme.
But O’Leary said those deals are different.
“Where [the loans] are available to everybody, it’s not state aid. It’s where they’re made exclusively available only to licensed carriers in that country then it becomes illegal state aid and it’s clearly anti-competitive and distorting the market.”
He said he feared “the well-run airlines going into this crisis, be it BA, easyJet, Ryanair and others are going to be the weakest airlines coming out of the crisis because we’re now facing a landscape where Air France will have €10 billion worth of ammunition.”
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