I note – probably with more amusement than Michael O’Leary intends – Ryanair’s recent defeat at the European Commission. I’m afraid I have never found it terribly surprising to see so-called entrepreneurs who complain about government distorting the markets do a 180 degree when it comes to their own subsidies, but O’Leary’s recent anti-EC tyrade should earn an award for doublethink.
I have never before heard a businessman scream about how the denial of government subsidies was “communist”, and I am hard pressed to understand how a decision to make Ryanair actually compete on the open market could be a “North Korean style” decision leading to a “communist valhalla” of high air travel prices. I realise that some folks set a very low bar for what sort of government intervention they consider legitimate, but this must set a record. Damn socialists, refusing to subsidise the free market! I should think this sort of discourse would have induced a reality check in Mr O’Leary.
This really brings new meaning to the old aphorism Socialism for the rich, capitalism for the poor.
For those new to this story, O’Leary’s operates discount airline Ryanair – one of the new generation of supercheap airlines. Of course, in the old days discount airlines cut costs by reducing on-board services, simplifying boarding and ticketing systems, and generally only operating a restricted service. O’Leary, however, came up with an alternative and complementary approach to lower prices even further.
First, he doesn’t fly anywhere than anyone would want to go. For example, Ryanair regularly advertises very cheap fares from various European cities to “Brussels.” What you have to work out on your own is that when Ryanair says “Brussels”, it means “Charleroi” – a second tier industrial city an hour and a half away from central Brussels. Once the additional transport costs are figured into the price, your ticket doesn’t seem so cheap, especially when compared to low-cost airlines like Virgin Express and SN Brussels that operate out of the much nearer Zaventem airport.
I gather service to Stockholm is even worse – that the airport he flies out of is 3 hours away from the city centre during rush hour.
Second, not only does he scam people into using distant, second level airports, but he also hits up airport owners – usually local government – for subsidies in return for bringing business to their areas.
The European Commission has ruled that the first strategy is legal, but that the second is not. EU anti-subsidies laws are designed to prevent local government from undertaking subsidies that might damage competition within the union. The whole idea is that you can’t use subsidies as indirect trade barriers, and you can’t use them to develop local business without the support of the European Commission. Thus, Ryanair can not accept subsidies from government-owned airports, only privately owned ones.
O’Leary, of course, says this is nonsense and that private airports are banging on his door, begging to give him their money in return for flying into their airports. However, considering the volume of his complaints, one wonders if he isn’t exagerating a mite bit? It seems unlikely that he will find an alternative private airport near Brussels, and he claims to be committed to continuing to use Charleroi.
Put up or shut up, Mr O’Leary. It’s not communism when the government refuses to help you sell airline tickets below cost.