TCS Daily

Wings Over Belgium

By Helen Szamuely - March 2, 2004 12:00 AM

How times change. On 3 February 2002, Loyola de Palacio, the European Commission's vice president and also its transport and energy policy chief -- a lady who has never done anything except worked in political organizations -- announced at the World Economic Forum:

"Ten years after liberalization, the true benefits of a clear focus on a liberalized European market - and not on specific airlines - are becoming clear for European consumers. Dynamic and entrepreneurial airlines are shaking up the industry and bringing prices down. We have seen such development very significantly in the case of short-haul carriers operating within Europe, notably easyJet and Ryanair. We now need to replicate this at an international level."

She was not alone in singing the praises of Ryanair. Pat Cox, an Irish MEP and president of the European Parliament, saluted the single market in December 2000, pointing to the success of Ryanair as a very good example of what could not have been achieved without it.

And now? We do not know what Pat Cox is saying but we do know what Loyola de Palacio is. In the name of the Commission she has ruled that Ryanair's special agreement with Belgium's Charleroi airport amounted to illegal subsidy and the low fare company must pay back the extra costs within five years and not do anything so naughty as have special deals with any publicly owned airport again. Curiously, this decision was taken in order to protect consumer choice. One must assume that, as usual, the Commissioner thinks that consumer choice is something that can be defined with a great deal of abstract discussion instead of a simple practical proposition: the freedom to choose what the consumer wants. It also means that companies, whether privately owned or subsidized by governments, can make special financial arrangements if they think these are advantageous in the long term. Indeed, some people might say that this was a careful husbanding of taxpayers' money.

Charleroi is, indeed, owned by the government (in this case, that of Belgium's Wallonia region), as are all public airports. They are all heavily subsidized as are the flagship carriers, in particular Air France, which will be very happy to see the upstart Irish competitor get out of the way. Zaventem, the other Brussels-area airport, which has not done any deals with cheap airlines but is host to some of the most expensive ones in Europe, is also heavily subsidized. Charleroi, which was half-empty until Ryanair started using it, had offered similar deals to other companies but was rejected. This is something de Palacio has overlooked when she announced that the deal was not legitimate in that it was not open to other companies. It was and they had not taken advantage of it. Ryanair did and made a mint. It also made Charleroi profitable for the first time in its history and created employment in an economically depressed area as well as allowing passengers to fly cheaply to Brussels -- not a service any Commissioner needs, since their first class travel is paid for by the taxpayer.

Michael O'Leary has appealed to the European Court of Justice against the decision, arguing that the court is more likely to be interested in consumers and businesses being successful than the Commission is. I would not bet on it. But the Commission may have scored an own goal. Privately owned airports are still allowed to make deals with airlines according to how they see fit. The Ryanair decision has intensified calls for the privatization of airports.

The author last wrote for TCS about the Common Agricultural Policy.


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