The European Transport Commissioner, Ms Loyola de Palacio, has recommended that Ryanair should repay subsidies it received from Belgian authorities at Charleroi airport, south of Brussels, which could amount to up to €13 million.
Commission sources told The Irish Times that Ms Palacio has concluded that reduced landing charges and ground handling fees at Charleroi are in breach of EU rules on state aid. A final decision will be taken by all 20 Commissioners next week and Ryanair is expected to mount a vigorous campaign to overturn Ms Palacio's recommendation.
In a decision that could have significant repercussions for low-cost air operations throughout the EU, Ms Palacio has also outlined strict conditions for state support for new routes, including that such support can be given for a maximum of three years.
Ryanair shares fell sharply in Dublin yesterday as a more unfavourable than expected ruling seemed likely. Shares fell from €7 to €6.75, down 3.6 per cent as the stock was heavily sold.
A Ryanair spokesman said the airline would appeal a decision it believed was unfair and warned that the terms of the ruling, as revealed, could be "disastrous" for low-cost airlines.
"All low-cost airlines will be materially affected and will impact on low fares for consumers," he said.
Ryanair pays landing charges at Charleroi at just 50 per cent of the published rate, an arrangement that Ms Palacio deems illegal state aid. She wants the airline to repay to the regional government of Wallonia - Belgium's French-speaking region - the difference between the preferential rate and the published rate.
Ms Palacio says that a ground handling charge of just €1 per passenger, which is a 90 per cent discount to its advertised €10 rate, also amounts to illegal state aid and she wants Ryanair to repay the shortfall. These arrangements were copperfastened in a 15-year agreement between the airport and Ryanair.
The Walloon government also gave Ryanair €2.5 million to cover the cost of office accommodation, marketing and other supports to Ryanair for introducing new routes from Charleroi. Ms Palacio says that such support is compatible with EU rules provided it complies with a number of strict conditions.
The routes must be clearly new; the cost of the support must be verifiable; the state support element can only account for a maximum of 50 per cent of the total cost of the service involved; and such support can be given for a maximum of three years.
Ms Palacio recommends that, if Ryanair's arrangements at Charleroi are found to have breached any of these conditions, the airline should repay to the Belgian authorities the cost of the support offered.
However, one source said the figure to be repaid could ultimately end up as low as €3 million. The Commission will discuss Ms Palacio's recommendation next week; Commission decisions need a simple majority.
The decision will affect Ryanair's deals at other state-owned airports across Europe.
Merrion Stockbrokers has estimated that a negative ruling could result in Ryanair having to repay up to €26 million to other airports. More expensive charges would also increase Ryanair's operating costs by as much as €33 million, or 11 per cent of its annual profits, according to Merrion.
The airline will report its third-quarter results today.
