The difficulties created by Ryanair suggest the revision of some EU regulations on air transport and competition

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 By Alfredo Roma *

Recently, Ryanair has launched another shocking announcement: from October 2017 to March 2018, an unspecified number of flights and several routes will be cancelled. At the same time about 700 pilots of Ryanair stated they wanted to leave the airline, and this sounds weird enough because usually pilots are well paid. Ryanair’s excuse that this is just a mistake in planning holidays, because Ireland has changed the fiscal year from April-March in January-December, does not hold. The problem arises from the management of the staff, which the Irish company has always adopted: the use of the flight crew to the limit of service hours provided by civil aviation authorities according to European and international rules; the framing of flight and ground personnel as resident staff in Ireland to enjoy tax advantages; demand for sales results in flight of ancillary products and services; cleaning of the stationary aircraft entrusted to flight attendants; difficulties in granting leave for sickness or holidays.

European civil aviation regulations do not fall into the merits of airline staff contracts, except for the employment limits established for safety reasons for the flight crew. Airlines’ staff contracts are therefore based on national provisions and trade union agreements. Considering the big difference between Ryanair’s work contracts and that of other European air carriers sooner or later the problem was to break out.

The value chain of the air transport

The air transport value chain includes: airports, which enjoy the so-called “traffic monopoly”, that is, a citizen who lives in Bologna first seeks a flight departing from Bologna and not from Milan or Rome; air traffic control which, except for rare cases, is a State monopoly; the large distribution that is an oligopoly; airlines, which are the weak ring of the value chain as they suffer from the most ruthless competition, being air transport transnational by definition and airplanes can move everywhere. Particularly in Europe, following the liberalization of the sector in 1993, competition developed rapidly among all 180 European carriers. This situation has led airlines to implement a far-reaching cost saving policy over the previous 1993, also seeking tax solutions such as Ryanair’s, registering, for example, planes in Ireland or Portugal where such registrations enjoy very low tariffs. Even in the aviation sector, as in the field of personal and corporate taxation, we would need common rules for EU Member States to offer equal market conditions for everyone. It is unacceptable that there are tax havens in the European Union such as Luxembourg, the Neth.erlands Antilles for the Netherlands, the Channel Islands for Great Britain, Andorra for Spain, Monaco Montecarlo for France, so it is unacceptable that workplace regulations or aircraft registration may alter competition within the European Union.

The silence of the DG Competition of the European Commission

It is surprising, then, that the European Commission’s General Directorate for Competition has not made its voice heard on the airline’s situation, created mainly by the advent of low-cost carriers, if not to curb any mergers. France and Germany have defended themselves against the low-cost companies’ business assault by relegating them to smaller airports, also because the French government and the German government maintain a kind of golden share in the equity of Air France and Lufthansa (as it should do the Italian government in Alitalia). Other countries such as Italy have opened all airports to low-cost airlines, creating some problems for national carriers. Perhaps the opening had to be done gradually. In 2000 Loyola de Palacio, EU Transport Commissioner, stressed that a consolidation of European carriers was necessary to make them competitive on the world market, but this never really happened. Sometimes national market competition authorities have curbed the merger of small-scale national airlines that would not certainly affected the free competition in Europe. Examining the problem of competition between airlines at national level no longer makes sense after the liberalization of the air transport. It has to be analysed at EU level, that is by the European Commission because the market is that of the EU Member States and not just the national one. This would allow the necessary consolidation advocated by Loyola De Palacio.

A new European policy for the air transport

Now, over 600,000 passengers that until March 2018 cannot fly Ryanair will be given a refund as provided for by Community rules. The procedure is complex and long to have this refund, but direct damage also adds other indirect damages to the economic activities to which cancelled flights and routes are linked.

From this fact, it is evident that a European vision of the air transport problem is needed to homogenize market and competition conditions and to make the whole industry profitable, not just for the actors they enjoy monopoly situations, but also for air carriers. If that had been understood before, we would not have come to the disaster created by Ryanair and others disasters such as the recent bankrupt of Air Berlin and Monarch.

In the meantime, on September 20th the Italian Antitrust Authority has opened an investigation on the Irish air carrier Ryanair for allegedly incorrect commercial practices in violation of the Consumption Code.

In particular, the Antitrust contests that the numerous cancellations of flights made or to be carried out in the coming months, as reported by press, could constitute a breach of the duty of diligence set out in Article 20 of the Consumption Code, to the extent that they would largely be attributed to organizational and management reasons already known to the airline, and thus not to occasional and exogenous causes outside its control, causing considerable disruption to consumers who had  scheduled their flights in advance and already paid for the relevant airline ticket.

Additionally, there is a second controversial profile concerning the tenor and the modalities of the information with which Ryanair informed passengers of flight cancellations and provided them with possible solutions (refund or modification of the ticket) that might mislead consumers about the existence and therefore the exercise of their right to financial compensation provided for by Regulation EC 261/2004 in the event of cancellation of flights.

This confirms that a decisive intervention* of the European Commission Antitrust Authority on this situation is needed.

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*Former President of the Italian Civil Aviation Authority (ENAC) and of the European Civil Aviation Conference (ECAC)

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