The World Low Cost Airlines Congress just ended in Barcelona last week. During the congress, the main recurrent idea was “implementing changes to survive”. Business models are challenged, and each carrier believes its model is the best one. But as we will see here under, low-cost carriers are often involved with legal actions concerning their websites, passengers’ rights, advertising, public subsidies, unfair competition… So, are low-cost carriers’ business models “borderline” with the law?

Passengers: the frontline of complaints

While Ryanair has been awarded as the best low-cost airline at the Budgies Awards in Barcelona by the industry peers, passengers don’t always share this perception as Ryanair is often pointed out as the worst low cost airline. Reasons given: long delays, overbooking, cancellations, downgrades, unfriendly staff, uncomfortable seats, poor legroom… Ryanair was the largest subject of complaints to the European Consumer Centre (ECC) from passengers in the European Union. The report revealed lost luggage as the number one complaint made against the airlines.

In Ireland, the situation is worst, Ryanair is most complained and accounts for a third of all complaints examined by the Commission for Aviation Regulation. “The ECC said the near doubling of total European complaints to 2,979 from 1,521 a year earlier showed that airlines are still too often ignoring passengers' rights”. Ryanair is also accused of not improving the ability of their customers to communicate with the company after sales by at least publishing an email address for this purpose. Ryanair’s passengers indicated that the complaint process of Ryanair is complicated and expensive because of the use of telephone. Last year, the National Consumers Agency (NCA) received several complaints from consumers claiming that they were unable to get through to telephone reservation agents to book flights using the vouchers. "To use my son's €50 gift voucher, I had to pay €49.30 for the phone call. The €50 voucher cost about €100" said a consumer. Dermot Jewell of the Consumers Association of Ireland said Ryanair was "one of the worst examples of a voucher system... It's very, very bad business practice that needs to be stopped and outlawed". The complaint service of Ryanair is so bad that the Gordon Brown government have indicated they will legislate to force the budget airline to launch an online complaints service. He doesn’t seem to have succeeded yet…

Watchdogs: the second line to protect consumers

In Spain, the government opened an investigation for illegal practices in the turnover of luggage. The practice of charging for checking in luggage is unlawful, according to aviation legislation in Spain. The Catalan Consumer Association (ACC) has opened complaints against the airlines that charge for checking in, a practice that has brought complaints from users because it violates their rights. These airlines include Ryanair, but also easyJet and Vueling.

Even communication and advertising lead to legal actions. Ryanair faced multiple complaints about its advertising including a provocative schoolgirl during a school-term flight sale. The Advertising Standards Authority for Ireland (ASAI) warned Ryanair that care should be taken when using images of children or people portrayed as children, and the National Women's Council of Ireland (NWCI) lodged a complaint against this advert: “The recent Ryanair ad depicted the sexualisation of a young woman, purely for commercial purposes” said Joanna McMinn, of the NWCI. The NWCI felt the advertisement was inappropriate, irresponsible and distasteful, adding the direct link between the sexualized image and schoolchildren. Other watchdogs reacted to this advertising trough Europe, like in Sweden by the voice of Trade Ethical Council against Sexism in Advertising (ERK). Despite these complaints, Ryanair refused to pull the banned ad, receiving free publicity from the debate.

The Advertising Standards Authority (ASA) reprimanded most low-cost carriers, like this easyJet ad grounded for “misleading” CO2 claims or misleading customers over the cost of its flights. We found similar complaints concerning Ryanair “false” 1 Euro flights. Jet2 also received a warning about its adverts promoting “free” tickets. Or even Flybe claiming that it was cheaper than rail, which was erroneous. After investigations, the ASA has ruled that Flybe’s three claims breached the code.

Public personalities have regularly been targeted by Ryanair’s advertisings, like the Spanish Queen Sofia, the French President Nicolas Sarkozy, Martin McGuinness and Gerry Adams Sinn Fein, the UK PM Gordon Brown, Jolanta Szczypinska a polish MP, Swedish Prime Minister Goran Persson and Foreign Minister Laila Freivalds… And they always lodged complaints.

The European Commission: Legal actions to respect the rules

The European Commission launched quite a few investigations on low-cost carriers’ practices. The best known of them are for illegal public subsidies from airports. Last year, the EC launched a formal investigation into an agreement for the provision of airport services at Bratislava Airport, which allegedly favors Ryanair. The Commission stated it has doubts about the agreement’s compatibility with EU rules on state aid. The whole business model of Ryanair is based on these airports’ subsidies, most of them being public subsidies. Therefore the EC launched investigations into contracts between Ryanair and European airports… The Aarhus Airport in Denmark has been accused of granting state aid to various airlines, including Ryanair. In France, the EC launched its formal investigation into contracts concluded by the Chambre de Commerce et d'Industrie de Pau-Béarn (CCIPB) with Ryanair and its subsidiary Airport Marketing Services Ltd. This investigation relates to two different contracts: the conditions for using the airport infrastructure at the airport of Pau, and the conditions for providing marketing services to CCIPB in order to promote the air route in question. In Finland, the investigation of the EC concerned Tampere Pirkkala airport, because of suspected state aid granted by the Finnish authorities. “The Commission questioned the compatibility of the arrangement concluded with Ryanair, whereby the airline pays an 'all inclusive' charge differing from the terms offered to other airlines at the airport”.

The third largest base of Ryanair, Frankfurt Hahn airport, is also under investigation of possible state aid from Hesse and Rhineland-Palatinate to the carrier. “Lufthansa has complained in the past that Ryanair benefitted from reduced take-off and landing fees at the airport, arguing that it amounted to an illegal state subsidy”. Still in Germany, Air Berlin also filed a complaint against Luebeck airport with the German Federal Court of Justice. The German low-cost carrier claimed the airport granted special conditions to rival Ryanair. “The German Association of Airlines sees the test case as a possible precedent for future cases related to airports subsidizing carriers”.

With its purest low-cost model, Ryanair is aimed by most of these legal actions, but of course the airline is not the only one. For instance, Flybe was caught filling its empty flights with paid actors. The terms of the deal said Norwich International Airport would impose a £280,000 penalty if Flybe did not carry 15,000 passengers on the Norwich to Dublin route during the 2007-2008 financial year. Short of 172 passengers, Flybe placed an advertisement on an actors' website for "extras" and warned staff to prepare to fly to Ireland. Friends of the Earth has called on the government to launch an investigation into the aviation industry following this practice of Flybe.

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Matthias, WhichBudget Airline Market Analyst

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