Ryanair 2009 Annual Report Download - page 103

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Ryanair is facing similar legal challenges by third parties (mainly competing airlines) with respect to
agreements with certain other airports. In 2007 and 2008, the European Commission announced that it had
begun investigations of airport agreements at the Hamburg (Lubeck), Tampere, Berlin (Schonefeld), Alghero,
Pau, Aarhus, Bratislava and Dortmund airports; however, Ryanair has only limited flights to and from the first
seven of such airports and does not operate flights to or from Dortmund. On June 17, 2008, the European
Commission launched a further investigation into Ryanair’s agreements at Frankfurt (Hahn) airport, which is a
significant base for Ryanair. The European Commission announced in a public statement that its initial
investigation had found that the airport might have acted like a private market investor but that it had
insufficient evidence to reach a conclusion and therefore had elected to open a formal investigation. The formal
investigation is ongoing. Previous complaints by Lufthansa about Ryanair’s cost base at Frankfurt (Hahn) have
been rejected by German courts.
In September 2005, the European Commission announced new guidelines on the financing of airports
and the provision of start-up aid to airlines departing from regional airports, based on the Commission’s finding
in the Brussels (Charleroi) case, which Ryanair successfully appealed. The guidelines apply only to publicly
owned regional airports, and place restrictions on the incentives these airports can offer airlines to deliver
traffic. Furthermore, the guidelines apply only in cases in which the terms offered by a public airport are in
excess of what a similar private airport would have offered. Ryanair deals with airports, both public and private,
on an equal basis and receives the same cost agreements from both. The guidelines have therefore had no impact
on Ryanair’s business, although they have caused significant uncertainty in the industry in relation to what
public airports may or may not do in order to attract traffic. A revision of the guidelines is planned for the end of
2009 or early 2010.
Ryanair believes that the positive decision by the CFI in the Charleroi case will cause the European
Commission to rethink its policy in this area. However, adverse rulings in the above or similar cases could be
used as precedents by other competitors to challenge Ryanair’s agreements with other publicly owned airports
and could cause Ryanair to strongly reconsider its growth strategy in relation to public or state-owned airports
across Europe. This could in turn lead to a scaling back of Ryanair’s growth strategy due to the smaller number
of privately owned airports available for development. No assurance can be given as to the outcome of these
proceedings, nor as to whether any unfavorable outcomes may, individually or in the aggregate, have a material
adverse effect on the results of operations or financial condition of the Company.
In November 2007, Ryanair initiated proceedings in the CFI against the European Commission for its
failure to take action on a number of state aid complaints Ryanair had submitted against Air France, Lufthansa,
Alitalia, Volare and Olympic Airways. Following the Commission’s subsequent findings that illegal state aid
had been provided to Air France and Olympic Airways, Ryanair withdrew the two relevant proceedings.
Ryanair is currently awaiting hearings in the remaining three cases.
In November 2008, Ryanair initiated proceedings in the CFI contesting the European Commission’s
refusal to grant Ryanair access to documents relating to the Commission’s state aid investigations at Hamburg
(Lubeck), Tampere, Berlin (Schonefeld), Alghero, Pau, Aarhus, Bratislava and Frankfurt (Hahn) airports. In
March 2009, Ryanair also appealed (to the CFI) two decisions issued by the European Commission in
November 2008 relating to the sale of Alitalia’s assets to Compagnia Aerea Italiana (CAI) and to a €300 million
rescue loan granted to Alitalia by the Italian government and subsequently converted into Alitalia’s capital.
Ryanair expects these proceedings to last between two and four years, in line with the average duration of CFI
proceedings.
Aer Lingus Merger Decision. During the 2007 fiscal year, the Company acquired 25.2% of Aer Lingus.
The Company increased its interest to 29.3% during the 2008 fiscal year, and to 29.8% during the 2009 fiscal
year at a total aggregate cost of €407.2 million. Following the acquisition of its initial stake and upon the
approval of the Company’s shareholders, management proposed to effect a tender offer to acquire the entire
share capital of Aer Lingus. This acquisition proposal was, however, blocked by the European Commission on
competition grounds. Ryanair filed an appeal with the CFI, which was heard in July 2009, and currently expects
the CFI to announce its decision approximately nine months thereafter. (see also: “Item 5. Operating and
Financial Review and Prospects—Business Overview”).