While Ryanair signals it will not concede any ground to British Airways' planned low-cost operation, Go, at London/Stansted, EasyJet is firing the first shots in a legal battle to prevent BA from cross-subsidising Go.
With Go yet to reveal details of its routes, in late February Ryanair announced plans to more than double the size of its continental European network by launching six new destinations from Stansted.
In its biggest ever batch of new route launches Ryanair, whose existing Stansted operation is limited to four Irish destinations, Glasgow, Stockholm and Oslo, will initiate new twice daily services to Venice, Pisa, St Etienne and Kristianstad and daily flights to Carcassonne and Rimini in June. Ryanair's focus on secondary airports is key to its ability to maintain a low cost base and offer flexible fares some 80 per cent cheaper than rivals such as BA or Alitalia. Ryanair also operates to Paris/Beauvais and Brussels/Charleroi from Dublin and on numerous points between Ireland and the UK.
Ryanair posted a net profit of IR£6.1 million (US$8.3 million) for the third quarter ended 13 December on operating revenues of IR£44.4 million. The airline boasts zero net debt, an 18 per cent net margin and $100 million in cash reserves. In early March it logged firm orders for 25 Boeing 737-800s with 20 options for delivery from March 1999, which will join its current fleet of 20 737-200s.
Ryanair's chief executive, Michael O'Leary, denies the expansion was brought forward due to BA's decision to base Go at Stansted. The carrier is ready to compete directly with Go should it opt to serve some of the same routes. And, unlike EasyJet, Ryanair has no plans to complain to the regulators, he adds.
EasyJet chairman Stelios Haji-Ioannou has filed a writ in the UK High Court seeking an injunction to prevent BA from cross subsidising its Go subsidiary. The writ states that such behaviour is an abuse of BA's dominant position under Article 86 of the European Community Treaty and will distort competition between EasyJet and Go in the low fare market.
The cross-subsidisation examples listed include BA's guarantee of Go's aircraft leases, and the procurement of maintenance, merchant fees, insurance, advertising, personnel, services and brand image at below market rates. EasyJet wants assurances from BA that it will not cross subsidise Go in the future and will set up a transparent accounting system to ensure a proper distribution of costs between its activities and Go. BA has issued a summons asking the High Court to strike out the action.
Haji-Ioannou says that EasyJet will complain to the European Commission 'as soon as BA steps out of line' but that the Commission has said it must wait until Go begins operations in May.
Source: Airline Business
