The extraordinarily low rates some airlines offer are the result of regional subsidies to airlines, most notably to Ryanair, according to Enrico Pennings, professor in Applied Industrial Economics at the Erasmus School of Economics.

Where many of Europe’s flag carriers are finding it hard to stay profitable in today’s volatile airline industry, Ryanair has grown to become Europe’s largest airline in terms of passengers. Its unique business model has allowed it to do so, Pennings explains. Ryanair typically flies at regional airports where it often is the only airline, making the region in question very dependent on Ryanair. The regions benefit from Ryanair’s presence, as new tourist markets can be, and are developed.

Normally airlines pay the airports for landing rights. But when the airline has a monopoly it becomes the airport that pays the airline, and in many cases that is Ryanair. An example is Alghero airport on Sardinia, which pays Ryanair six euro per passenger that lands, and it guarantees Ryanair a minimum amount per plane that equals a flight with sixty percent  of seats occupied. The cheapest rates, for early booking passengers, are covered by these subsidies, and airports and regions are keen to keep paying, because Ryanair will move to a neighbouring region if they don’t. “If several airlines are paid these subsidies by means of negative landing rights, there shouldn’t be a problem”, Pennings says. “But if only one airline receives them, it is state aid and Brussels must act.” KL