How new E.U. plans could hurt Ryanair

The European Union wants to cut subsidies to airports, which could be a problem for budget airlines.

Ryanair has built its low-cost airline model on flying to smaller airports instead of major hubs and, of course, limiting passenger freebies. But now the European Union is looking to dramatically reduce government subsidies to European airports.

Bloomberg Businessweek explains why that could hurt Ryanair:

EU antitrust regulators currently are investigating at least 23 cases, 19 of them involving Ryanair, in which airports eager to attract flights allegedly provided subsidies to airlines (for example, by providing discounts on gate fees). In some of the Ryanair cases, authorities have said the airports went even further, providing direct cash payments to the airline.

Basically, the E.U. is concerned that smaller airports are using state subsidies to attract budget airlines like Ryanair and reducing competition. Though the European Commission says it's not a direct attack on budget airlines.

"Low-cost carriers have brought extremely important benefits to passengers, enabling millions of European citizens to travel cheaply. The Commission fully recognizes this and does not question this business model, which has proved extremely successful," the Commission said in a statement. "The revised rules will apply to all airlines and airports irrespective of their business model in order to preserve a level playing field in the internal market."

The E.U. plans for the new guidelines to be adopted in 2014, with the subsidies -- estimated at around 3 million euros each year -- being phased out over 10 years. By then, maybe we can expect Ryanair to also start charging passengers to use their arm rests or go to the bathroom.

Read more: Bloomberg Businessweek/E.U.'s proposed guidelines

Photo: Flickr/Paolo Margari

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