Ryanair and Iberia in tax break row

Andrew Clark, transport correspondent

A fresh furore erupted yesterday over Ryanair's alleged receipt of state aid, as Iberia threatened to sue the Irish budget carrier for accepting public money to launch routes from airports in northern Spain.
Spain's national airline has accused Ryanair of receiving tax breaks and incentives worth a total of 10m (6.8m) from airports at Santander and Girona.

The row is the first test of the European commission's ruling this year that Ryanair was benefiting from illegal subsidy by negotiating a discounted landing charge of 1 per passenger at Charleroi's publicly owned airport in Belgium.

Angel Mullor, Iberia's chief executive, said: "We are collecting information about what Ryanair is doing in different Spanish airports. As soon as we have the minimum information for the case to be admitted, we will bring demands against that airline."

Ryanair's low-cost strategy is predicated on persuading little-used regional airports to give it incentives to deliver travellers who, the airline argues, will revive local tourism and contribute to the economy.

Loyola de Palacio, the then European transport commissioner, ruled in February that this constituted unfair public aid where airports were bankrolled by taxpayers.

An Iberia spokesman, Jaime Pérez-Guerra, said yesterday Ryanair had struck a deal worth 6.2m over two years with the Catalan government in return for the launch of services linking Girona, near Barcelona, to 19 European destinations including London, Liverpool, Glasgow, East Midlands and Bournemouth.

Mr Pérez-Guerra said the regional government of Cantabria, in north-west Spain, had provided similar incentives of 1.2m a year for three years in return for services landing at Santander, which Ryanair began this year.

"If you get a lot of help from the authorities, you are distorting the market," said Mr Pérez-Guerra. Iberia, which is a partner of British Airways, was privatised in 1999. It is concerned that Ryanair's routes will squeeze its regional offshoot, Air Nostrum.

Ryanair's head of regulatory affairs, Jim Callaghan, said its marketing agreements with Spanish regions were "non-exclusive" and available to any airline, including Iberia. "Iberia is just another high-fares airline which has been ripping off Spanish consumers for years and leaving provincial Spain bereft of routes throughout Europe."

Since its entry to the Spanish market in 2002, Ryanair has launched 44 routes from 11 airports. It expects to deliver three million visitors to Spain this year, which it claims will sustain 4,000 jobs in regional economies. Ryanair is also in dispute with Air France over landing deals in France.

Alitalia lost 620m in the first half of 2004. The airline, fighting to avoid bankruptcy, has been accused by Ryanair and other low-cost carriers of getting illegal aid in an Italian government rescue package.

(Guardian vom 15.10.2004)