Lufthansa and airberlin wants Ryanair to repay millions of euros in what is claimed to me illegal subsidies as Germany's Federal Court of Justice overturned judgments (10-Feb-2011) by the relevant regional and appeals courts, and ruled the fees may amount to subsidies in breach of EU competition rules (Reuters/AP, 10-Feb-2011). Ryanair argues that is has neither sought subsidies nor received any. Lufthansa stated: “We expect that it will become more difficult for Ryanair and smaller airports to profit from illegal subsidies and distort competition in the air travel industry. We consider the court's decision to be a success."
Ryanair may lose subsidy battle with Lufthansa and airberlin
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Lufthansa: mainline pilot deal, growing Ryanair threat at Frankfurt; Eurowings vital to both.
The Lufthansa Group's juggling act continues to impress with the sheer number of balls that it has sought to keep in the air over the past year.
Striving for labour productivity improvements in its mainline operations, while also attempting to minimise industrial unrest; expanding its Eurowings low cost brand through organic growth, while also integrating the acquisition of Brussels Airlines and the wet lease of aircraft from airberlin; facing the growing threat of Ryanair's entry into its biggest hub at Frankfurt, while seeking to maintain a good relationship with the airport's owner Fraport; keeping positive momentum in its financial performance after earning more than its cost of capital in 2014-2016, while the global cycle may have reached a peak.
In the same week as reporting solid, if unspectacular, financial results for 2016, Lufthansa has achieved a break through agreement with its pilots over pay and conditions. As a strategic tool, Eurowings helped it to reach this agreement, but the LCC subsidiary now needs to become financially successful.
Later in Mar-2017, Ryanair will start its first four Frankfurt routes, to which it will add 20 more next winter. Eurowings will need to be part of Lufthansa's response to this growing competitive threat.
AENA: Spain's airport operator must cut charges, but airline yields are already falling
After much delay, in late Jan-2017 the Spanish Council of Ministers approved the airport regulation document setting AENA's airport charges for the next five years. The headline numbers include a 2.2% annual decline in charges from 2017 to 2021, equivalent to an overall cut of 11% through the period.
The legal framework prevents tariff increases before 2025, but the outcome was in contrast with the Spanish airport group's own proposal to freeze charges. Strong traffic growth of 11% to an all time high level of 230 million passengers in 2016 may have influenced the regulator's decision.
In response, AENA has decided to remove an incentive mechanism which rewards airlines for traffic growth with airport charge discounts. The removal of discounts is estimated to offset the 11% reduction by one third.
In fact, this discount scheme has been quite effective in stimulating traffic growth in recent years. However, traffic growth in Spain was also boosted in 2016 by high airline capacity growth switched from other (risk) markets. Airline yield declines are probably noticeably heavier than AENA's regulated price reduction.