Ryanair 2011 Annual Report Download - page 106

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Ryanair believes that the positive decision by the CFI in the Charleroi case has caused the European
Commission to rethink its policy in this area. Ryanair believes that the Court’s findings should be addressed in
the upcoming revision of the guidelines. 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. The
case related to Lufthansa concluded with the EU General Court’s ruling in May 2011, in which the Court found
that while the European Commission has not failed to act, it has unreasonably delayed the launch of the
investigation, which justified Ryanair’s action for failure to act. Consequently, the Court ordered the
Commission to pay 50% of Ryanair’s costs in the proceedings. Ryanair is currently awaiting hearings in Alitalia
case, following the withdrawal of the Volare case in August 2010.
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. These
cases were heard on July 7, 2010 and a judgment was issued in December 2010. The CFI found that the
European Commission has acted in line with applicable legislation, which highlighted the unfairness inherent in
state aid procedures in the EU, whereby alleged beneficiaries of aid have no right of access to the Commission’s
file and therefore cannot properly exercise their rights to defense and good administration. The CFI ordered the
Commission to pay Ryanair’s costs in three of the eight access to documents cases.
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 1300
million rescue loan granted to Alitalia by the Italian government and subsequently converted into Alitalia’s
capital. A hearing in this case took place in June 2011 and judgment is expected in six to twelve months.
Matters Related to Investment in Aer Lingus. 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 1407.2 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 2006 offer was, however, prohibited by the European
Commission on competition grounds. Ryanair filed an appeal with the CFI, which was heard in July 2009. On
July 6, 2010 the Court upheld the Commission’s decision. (see also: “Item 5. Operating and Financial Review
and Prospects—Business Overview”).
The then EU Commissioner for Competition, Neelie Kroes, said on June 27, 2007 that, “Since Ryanair
is not in a position to exert de jure or de facto control over Aer Lingus, the European Commission is not in a
position to require Ryanair to divest its minority shareholding, which is, by the way, not a controlling stake.” In
October 2007, the European Commission also reached a formal decision that it would not force Ryanair to sell
its shares in Aer Lingus. However, Aer Lingus appealed this decision before the CFI. In January 2008, the CFI
heard an application by Aer Lingus for interim measures limiting Ryanair’s voting rights, pending a decision of
the CFI on Aer Lingus’ appeal of the European Commission’s decision not to force Ryanair to sell the Aer
Lingus shares. In March 2008, the court dismissed Aer Lingus’ application for interim measures. Aer Lingus’
main appeal was heard in July 2009. On July 6, 2010 the court rejected Aer Lingus’ appeal and confirmed that
Ryanair cannot be forced to dispose of its 29.8% stake in Aer Lingus. Aer Lingus had two months and 10 days
from such date to appeal this judgment to the Court of Justice of the EU. In addition to the risk that the Court of
Justice may overturn the lower court’s ruling, should Aer Lingus choose to appeal it, EU legislation may change
in the future to require such a forced disposition. If eventually forced to dispose of its stake in Aer Lingus,
Ryanair could suffer significant losses due to the negative impact on attainable prices of the forced sale of such
a significant portion of Aer Lingus’ shares.