How Ryanair deals with French Airports
Today, I want to publish a post about how Ryanair deals with airports, especially in France. I chose to take a look at the French market because of the difficulties that the Irish budget airline has had in trying to increase its market share due to the high-speed train’s (TGV) success.
For several years now, Ryanair has been dealing with small French airports, mostly located in the South, such as Bergerac, Carcassonne, La Rochelle or Nimes.
Ryanair always deals in the same way, no matter the country: it brings in passengers, in return of subsidies (which pay Ryanair’s marketing costs) and free or lower airport fees. Most of the time, the airport also has to hire, train, and pay all the needed ground personnel.
If you take this into account, you’ll understand why it might not be that profitable for a region to work with Ryanair.
Regardless, a lot of small airports try to attract Ryanair at any cost. Often, when they realise that they are no longer able to deal with the high costs, it is too late, as the Irish airline doesn’t allow for contract changes. Even worse, Ryanair usually asks for more and then some!
This explains why, for the past 2 years now, a lot of French Regional Audit Courts (CRCs are specialised in checking public regional accounts) have started to look into the agreements Ryanair stroke with various public authorities, especially the Council Chambers of Commerce and Industry (CCI), which manage the French regional airports. A total of 25 reports have to the day pointed out the existence of unlawful agreements between CCIs and the company.
Indeed, the contracts require that the regions pay substantial amounts in order to keep Ryanair. “The loyalty of Ryanair mainly depends on subsidies and deals that the company obtains”, says the CRC of Languedoc Roussillon about the Nimes Airport. In exchange of these subsidies, the agreement stipulates that Ryanair must actively promote the region. In many cases however, the company has not respected this term, like in the Midi Pyrenees, where Ryanair operates out of Rodez Airport.
Also, as noticed by one CRC, it appears that European Law does not allow for this type of subsidised contract. In fact, Council Chambers “run legal and economic risks” said one of the surveys.
To escape European laws, tricky financial agreements have had to be imagined, as in the case of the Pau airport. “For instance, to avoid European imposition, Council Chambers will have to deal with another firm called Airport Marketing Services Limited to promote the region of Pau, for which the annual cost is about 500,000€”. Only then, can the CCR consider these subsidies to be fees for a service provided by Airport Marketing Services Limited rather than financial aid given directly to Ryanair. However, the fact remains that Airport Marketing Services Limited is managed by Ryanair and according to the CRC of Aquitaine it amounts to the same.
Through these published reports, is revealed the true economic model of the company: it consists in bringing passengers into a given airport in order to receive a substantial amount of financial aid. Several courts have already announced that this practice is illegal; such was the case in Strasbourg, Pau and Charleroi (Belgium).
Day after day, with the difficulties brought about by the economic crisis, we can guess that CRCs will further force public authorities to cut these programmes and focus on what is truly essential. Ryanair may soon have to find another way to receive public money with which to run its business.
This post is based on an article from La Tribune
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[...] really reminds me of Airport Marketing Service, a 100% subsidiary company, which perceives all of Ryanair subsidies… Once again, Ryanair [...]
Hmm, that is a bit worrying if you are offering accommodation or other tourist related services in the areas served by Ryanair. There must be a possibility prices will rise or they will pull out altogether if their current contracts are considered illegal and that is upheld.
Lets face it Ryanair won’t pick up the tab.
Any business that builds a revenue model soley on the plans of Ryanair does not deserve to continue in business, it has been apparent for a number of years that Ryanair will move into or out-off a location based on their perceptions on the continued viability of the routes that service that particular destination, in their eyes sound business sense. Ryanair does not have a public service clause in any contract it holds, it therefore makes decisions purely on commercial grounds. It is just that they are more hard headed when it comes to negotiating contracts, I did not see a similar backlash when Flybe cut a large number of routes to French regional airports, it is just the Michael O’Leary and Ryanair are the ones the press love to hate!