Ryanair’s Chief Is on a Mission to Wreck EU Airline Rescues
O’Leary Picks Fight With Lufthansa in Bid to Wreck EU Virus Plan
(Bloomberg) --
Michael O’Leary, Ryanair Holdings Plc’s combative chief executive officer, is picking a fight with Deutsche Lufthansa AG as he ramps up a legal battle with rivals being doled out state aid to survive the Covid-19 pandemic.
After challenging a handful of government measures that have favored national carriers while excluding the scrappy Irish discounter, O’Leary said his next target is Lufthansa as Germany and other states ready billions of euros to help the region’s biggest airline overcome the worst slump in more than a century of commercial aviation.
“Lufthansa is going around hoovering up state aid like the drunken uncle at the end of a wedding, drinking from all the empty glasses. They can’t help themselves,” O’Leary said in an interview with Bloomberg. “We don’t want state aid, but we’re now being asked to compete with not one hand, but two hands tied behind our back.”
As well as vowing to challenge the expected European Commission approval for the Lufthansa aid package, he said Ryanair would also seek to topple France’s $8 billion rescue package for Air France.
Dublin-based Ryanair has already sued the commission twice this month, challenging its approval of French tax breaks and Sweden’s 455 million-euro ($491 million) loan guarantees for local airlines. O’Leary is a constant thorn in the side of the European Union regulators, fighting some 50 cases at the EU courts in the past 25 years. Most are lawsuits to overturn commission decisions. These include several EU orders against government subsidies to Ryanair as well as two EU vetoes to taking over Irish rival Aer Lingus.
While Lufthansa has benefited from Germany’s furlough program that pays workers’ wages, it hasn’t yet received state aid and has been embroiled in lengthy talks with the government to limit the size of a potential German stake. Belgium and Austria have also discussed state aid for the group’s local units, while Switzerland has agreed to give support.
A spokesman for Lufthansa declined to respond to O’Leary’s outburst, as did Air France-KLM. The commission in Brussels has vowed to defend its position in court.
In his fight over Covid-19 aid, O’Leary is taking aim at a potential EU weak point. The coronavirus crisis has forced the bloc to bend its usual rules and allow governments to pour more cash in as the lockdowns leave entire industries struggling to survive. But the commission’s role is to curb state support that gives an unfair advantage to selected companies while others are left to flounder.
O’Leary’s fears that rescued firms could emerge stronger, slash fares and swallow up rivals are shared by the EU. The authority is trying to place safeguards -- such as a partial takeover ban -- to prevent that from happening. At the same time, regulators are under immense pressure to get out of the way and let governments spend to save the European economy as business activity collapses.
“All your outgoings are being covered by payroll support schemes at the moment anyway, so what do you need all the crack cocaine of 12 billion of state aid for?” O’Leary said. He’s concerned taxpayers’ cash could allow Lufthansa to acquire struggling leisure carrier Condor, creating a “stronger monopoly” in Germany. He’s also attacking Italy’s repeated rescues for Alitalia SpA.
“There’s no doubt we think the aid will be ruled illegal, and then the Italians will simply say to Alitalia that we don’t need the aid repaid anyway, or the French will say we don’t want the money back from Air France but the damage will all have been done.”
O’Leary said his legal advice “is that we win these state aid cases in reasonably short order, say before the end of the year” at the EU’s General Court in Luxembourg before facing potential appeals to the region’s top court.
In reality, he may have to wait far longer. Cases take about a year and a half before getting a ruling at the General Court. Appeals to the EU’s top court add a similar delay.
Still, the legal action may already have scored some minor success. Sweden drafted a back-up 137 million-euro guarantee for SAS AB in case it couldn’t get access to the wider Swedish program Ryanair is challenging.
“In the short term, if it can intimidate and dissuade people from a course of action, that’s an early victory without having to go through the fight,” said Alec Burnside, a lawyer at Dechert LLP in Brussels. “It is a tactic of creating noise, creating attention and trying to move the needle in what’s happening.”
And there are other battles ahead. O’Leary spits fire at Italy’s plans to nationalize Alitalia “that’s lost money every year” for decades and is now second to Ryanair with around a 20% market share in the country.
“Ryanair is the number one airline in Italy, we have about a 34-35% market share,” he said. “On that basis the Italian government should be giving us 4 billion” euros. “Now, we don’t want state aid from the Italian government.”
©2020 Bloomberg L.P.