Ryanair demands incentives to become Slovakia's "national carrier"

By bne IntelliNews April 11, 2013

bne -

Irish budget airline Ryanair could become Slovakia's de facto national air carrier as it mulls establishing a base in the country from which to boost its Central European operations. However, similar to other investors in the country, the airline says it intends to pump Bratislava for incentives.

Europe's biggest discount airline hopes to boost passenger numbers on routes to Bratislava - which it advertises as also serving Vienna - and is in talks about basing planes in Slovakia, CEO Michael O'Leary told reporters on April 10. "We plan to set up a base in Bratislava next year or in 2015 that will enable us to raise passenger numbers from more than 875,000 last year to up to 2.5m," O'Leary said, according to AFP.

Ryanair recently ordered 175 Boeing 737-800 planes in a major fleet expansion that will bring its total number of aircraft to 400 as it targets expansion in CEE. The company was quick out of the blocks when Hungarian flag carrier Malev was grounded in February 2012, filling some of the empty slots at Budapest Airport that the bankruptcy opened up.

Ryanair serves Bratislava from 16 locations, among them London and Rome, and ranks as the top carrier to the city after starting operations in 2005. The main Slovak airport's capacity jumped to 5m passengers a year from 2m after a recent upgrade, but it recorded its fourth consecutive drop in passenger numbers, to 1.4m, in 2012.

A major plank in Ryanair's ambition to expand Slovak operations is that it claims the Bratislava route also serves the Austrian capital, which sits around 60 kilometres down the road. Meanwhile, Slovakia has no airlines based in the country. It has had no flag carrier since Slovak Airlines - created in the wake of the break-up of Czechoslovakia in 1993 - ceased flying in 2007, while other budget airline start-ups have come and gone in recent years.

"Other low-cost carriers are looking for markets where they don't need to compete with Ryanair," O'Leary claimed, when asked about the recent move by peers to expand outside EU markets. "Once you go outside the European Union it's a regulated market - you need to get permission from some Middle Eastern government. We don't want to grow in the Middle East; we want to grow in Europe."

"We'd like to see some of these airplanes based in Bratislava," he said of the fleet additions, adding that any final deal on a base in Slovakia would depend on the level of incentives on offer from Bratislava.

Ryanair joins a growing line of potential and existing investors calling for incentives, and a challenge to a government struggling to raise the tax revenues needed to meet ambitious fiscal targets. With Slovakia's economic development over the last decade or so almost entirely dependent on attracting foreign investment, Bratislava is now facing demands from several to top up incentives or risk losing them. That has seen the left-leaning Prime Minister Robert Fico forced to haggle with large international companies over how much the struggling Slovak budget can afford to offer.

Last month, the PM announced that he had finally thrashed out a deal to persuade US Steel not to sell its Kosice plant - the country's biggest employer. On April 9, German tyre maker Continental announced Slovakia has beaten off regional competition to attract a €250m investment in a new plant. Neither the company, nor Fico, were willing to discuss the potential level of incentives on offer.

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