Brussels orders Germany to recover 14 million in illegal aid to Ryanair

13-09-24

The European Commission has taken a firm step in its mission to ensure compliance with state aid rules in the European Union by ordering Germany to recover 14 million euros that were illegally granted to Ryanair. These funds, earmarked for Frankfurt-Hahn Airport, are considered state aid that is not compatible with the common market as it gives an unfair advantage to the Irish airline over its competitors.

This opinion is the result of an in-depth investigation by the Commission into a series of financial agreements between the airport and Ryanair, which began in 1997. In that year, Frankfurt-Hahn became a key operational base for the low-cost airline, facilitating a significant expansion in air traffic in the region. However, the favorable conditions granted to Ryanair did not comply with EU regulations aimed at ensuring free competition and avoiding market distortions.

Frankfurt-Hahn Airport, which was partly publicly owned, was the subject of agreements that included favorable airport charges and conditions of use for Ryanair, as well as the provision of state aid disguised under the guise of commercial agreements. These agreements, according to the Commission, were not offered on the same terms to other airlines operating at the airport, creating an environment of unfair competition.

One of the most controversial aspects was the use of public funds to cover operating losses at the airport, a scheme that mainly benefited Ryanair, the airport's largest user at the time. In addition, the airline was favored by reduced fares and direct subsidies that were neither transparent nor justified in economic terms.

The Brussels ruling points out that such aid was not notified to the European Commission, as required by the rules, which prevented a proper review to determine whether it was compatible with the rules of the single market.

The European Commission's decision means that Ryanair will have to repay the aid received, although the onus is on the German State to proceed with the recovery of the funds. This recovery process may be long and complex, as it involves the review of agreements dating back more than two decades.

Ryanair, for its part, has denied receiving preferential treatment or any illegal aid, arguing that the fares and conditions offered were negotiated on normal commercial terms. However, the airline has already been at the center of similar investigations in other European countries, which has led to increased scrutiny of its business model and its relationship with regional airports.

Germany also faces challenges with this decision, as it must recoup the money in a context where Frankfurt-Hahn has been struggling financially, and declared bankruptcy in 2021. This airport, once seen as a strategic bet to attract low-cost air traffic, has been struggling to stay afloat, exacerbating the current situation.

European state aid rules seek to prevent governments from using public funds to give undue advantages to domestic or foreign companies, which can distort competition in the common market. These principles are essential to ensure that all companies, regardless of their size or country of origin, can compete on a level playing field.

The European Commission is responsible for monitoring such aid and, in the event that it is granted without its prior authorization or under conditions that are not compatible with the common market, it can order its repayment, as has been the case with Ryanair. The recovery of aid is aimed at restoring a level playing field in the market and preventing a company from unfairly benefiting from public resources.

The ruling against Ryanair and Germany may set an important precedent for other airports and airlines operating under similar conditions in Europe. The use of public funds to subsidize low-cost airline operations has been a common strategy to develop regional airports and attract airlines that generate traffic and economic activity. However, this practice has been subject to criticism, as in some cases it has resulted in market distortions and unfair competition.

The decision also comes at a critical time for Ryanair, which continues to expand its route network in Europe. The airline has been under constant scrutiny due to its labor practices, its aggressive pricing policy and now, its financial arrangements with airports.