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The Case of Ryanair – EU State Aid Policy on the Wrong Runway

  • Friedrich Gröteke

    ()

    (Faculty of Business Administration and Economics, Philipps Universitaet Marburg)

  • Wolfgang Kerber

    ()

    (Faculty of Business Administration and Economics, Philipps Universitaet Marburg)

For the European Commission the case of Ryanair is a precedence decision about the application of state aid policy on agreements between regional airports and airlines. In a long-term contract with the regional airport of Charleroi (near Brussels), the Irish lowcost airline Ryanair received better conditions than other airlines. In return, it committed itself to transport a certain number of passengers to this airport for a period of fifteen years. This alleviates considerably the entry of the so far non-established Charleroi Airport into the market for international airports. The Commission interprets these better conditions as a discrimination, which distorts competition among airlines. Contrary to that, a thorough economic analysis shows that these conditions must be regarded as a normal form of price differentiation in effective competition. Any airlines would have received similar conditions, if they have offered similar advantages to the airport. Consequently, the decision of the Commission in the Ryanair case is wrong. Additionally, the principles of the Commission, which entail the danger of an all-encompassing regulation of prices for airport services, are misleading from an economic point of view, because they tend to impede effective competition in the aviation sector. The real state aid problem is, however, whether and under what conditions the public funding of airports leads to a distortion of competition among airports. This problem remains unsolved. This is also true for the problem of the slot-allocation on airports.

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File URL: http://www.uni-marburg.de/fb02/makro/forschung/gelbereihe/artikel/2004-13-Groeteke-Kerber.pdf
File Function: First version, 2004
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Paper provided by Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) in its series Marburg Working Papers on Economics with number 200413.

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Length: 27 pages
Date of creation: 2004
Date of revision:
Publication status: Forthcoming in ORDO – Jahrbuch für die Ordnung von Wirtschaft und Gesellschaft, Lucius & Lucius, Stuttgart, Bd. 55
Handle: RePEc:mar:volksw:200413
Contact details of provider: Postal: Universitätsstraße 25, 35037 Marburg
Phone: 06421/28-1722
Fax: 06421/28-4858
Web page: http://www.uni-marburg.de/fb02/
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  1. Starkie, David, 2002. "Airport regulation and competition," Journal of Air Transport Management, Elsevier, vol. 8(1), pages 63-72.
  2. Barrett, Sean D., 2004. "How do the demands for airport services differ between full-service carriers and low-cost carriers?," Journal of Air Transport Management, Elsevier, vol. 10(1), pages 33-39.
  3. Gillen, David & Lall, Ashish, 2004. "Competitive advantage of low-cost carriers: some implications for airports," Journal of Air Transport Management, Elsevier, vol. 10(1), pages 41-50.
  4. Fritz Machlup, 1955. "Characteristics and Types of Price Discrimination," NBER Chapters, in: Business Concentration and Price Policy, pages 397-440 National Bureau of Economic Research, Inc.
  5. Barrett, Sean D, 2000. "Airport competition in the deregulated European aviation market," Journal of Air Transport Management, Elsevier, vol. 6(1), pages 13-27.
  6. Wolfgang Kerber, 2003. "Wettbewerbsföderalismus als Integrationskonzept für die Europäische Union," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 4(1), pages 43-64, 02.
  7. Friedrich Gröteke & Klaus Heine, 2004. "Regionale Steuerkompetenzen und europäische Beihilfenkontrolle am Beispiel des Baskenlandes," List Forum Chapter, in: List Forum Band 30, edition 1, volume 2, chapter 9, pages 137-152 List Gesellschaft e.V..
  8. Clayton, Edward, 1997. "A new approach to Airport User Charges," Journal of Air Transport Management, Elsevier, vol. 3(2), pages 95-98.
  9. Starkie, David, 1998. "Allocating airport slots: a role for the market?," Journal of Air Transport Management, Elsevier, vol. 4(2), pages 111-116.
  10. Graham, Brian, 1997. "Regional airline services in the liberalized European Union single aviation market," Journal of Air Transport Management, Elsevier, vol. 3(4), pages 227-238.
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