Chapter 3.png
  • People flying Ryanair should pay for their own tickets

    Last week saw Europe extend its dirtiest subsidy, the one that makes ultra-cheap air tickets possible, by at least another decade. That’s the simplest way to sum up new rules for state aid to regional airports and airlines. The text itself is, as usual, almost impossible to read for lay people, so in this piece I will try to paint the rules and their consequences as simply as possible.

    Let me start with the widest possible picture. The contribution of aviation to man-made climate change stands at 5%. The Commission says that in Europe the sector adds €140 billion to GDP and 2.3 million jobs, both of which represent 1% of the EU total. The takeaway: aviation is five times more climate intensive than the average economic activity in Europe. Still, the industry is fighting like mad, in unison with foreign airlines and governments, to get out of the emissions trading system. Moreover, there is still no tax on fuel and no VAT on tickets – exemptions worth €40 billion a year.
    On top of all this, the Commission has allowed an almighty, and entirely avoidable, mess of subsidised regional airports to sprout up. Many of the over 400 regional airports in the EU are desperately trying to woo low-cost carriers using taxpayers’ money. Some are barely half an hour’s drive apart. Elephant Ryanair is adept at playing the small airport mice off against each other and using their services for (almost) nothing. This makes rock-bottom fares possible, the purchase of which is the cheapest and fastest way to heat the planet. Traffic from small airports is exploding: 130% growth over the past decade, versus ‘only’ 29% for the larger airports. 
    Of course, all this makes a mockery of fair competition in the aviation market.
    How could this happen? Well, we have had the equivalent of butchers approving their own meat: until a few years’ back, the Commission’s transport department was in charge of policing state aid. It is in these people’s job description to care more about airports than about taxpayers. The result has been that, despite operating aid in principle being illegal, since 2005 only four cases have been declared illegal with repayments ordered. Dozens of cases have been approved and an estimated 50 or so have been left entirely undecided. And this is the tip of the iceberg, the known cases; it’s anyone’s guess how big the underwater bit is.
    Late 2009, the Commission’s competition department finally took over. But for four long years they did nothing either; four years during which subsidies became even more entrenched. And now the word is out. Airports with under 700,000 passengers can be 80% subsidised with a review in five years. For airports with between 700,000 and 3 million, the rate is 50% – but in 10 years’ time they have to be phased out. That is 2023 – two generations of politicians from now.
    To add insult to injury, the Commission has said that it will decide the mountain of some 60 undecided cases on the basis of the (much more lenient) new rules. The message: ‘Don’t worry about cheating; if enough of you do it, we change the rules.’
    For the short term, the only way to insert some credibility in the policy is to now start policing it vigorously. We will surely watch the Commission’s decisions closely. 
    Looking forward, the US offers some pointers for a better solution by making the industry pay for subsidies to smaller airports. There is no better way to make clear that free lunches don’t exist.
    The idea of people flying Ryanair with other people’s money simply does not belong to the 21st century. It’s time for Europe to get that.