Ryanair wins under State air cover plan

Ryanair is the largest beneficiary of the £5 billion (€6.35 billion) insurance indemnity given by the Government to Irish airlines, according to the Department of Public Enterprise.

The low-cost operator denied yesterday that the guarantee was a state aid and said that accepting the indemnity did not undermine the airline's position on bail-outs for rivals Aer Lingus and Sabena. Ryanair has already complained to the European Commission over a €125 million loan to Sabena from the Belgian government and says it will oppose any rescue for Aer Lingus.

The Government stepped in last week to cover Ryanair and other Irish-registered airlines after insurance companies scaled back their cover in the wake of the use of hijacked planes to attack New York and Washington. Insurers stopped providing cover for "war risk and allied perils" on September 24th because of uncertainty about potential liabilities.

Ryanair would have had to stop flying if the Government had not agreed to cover war risks subject to a cap of £5 billion. The department said yesterday that Ryanair wrote to it ahead of the September 24th deadline asking to be included in any proposed state scheme. War risk cover has been available from September 28th, according to the Department, but Ryanair is still participating in the Government scheme, according to the department.

"Nobody has come back and said we will now arrange our own cover," said a spokesman.

Ryanair is the largest Irish airline in terms of passengers numbers. It carries nine million passengers every year, compared to Aer Lingus, which carries six million. The Government indemnity covers all Ryanair flights including those between destinations outside of Ireland.

Mr Michael O'Leary, chief executive of Ryanair, said that the airline had originally offered to pay the Government for providing additional indemnity, but the Department of Public Enterprise had declined. He added that the Department's original proposal had included a charge being levied on the airlines. He suggested that this was dropped on foot of representations from Aer Lingus. "It is not state aid, because it is not costing the state a penny. We would be happy to pay in any case," said Mr O'Leary.

Ryanair stepped up its attack yesterday on what it believes is a campaign by Aer Lingus for Government assistance. The state-owned airline has warned that it could lose up to £170 million this year and next year in the wake of the terrorist attacks.

The board of Aer Lingus meets next Tuesday to finalise a restructuring plan that its expected to see more than 1,000 permanent jobs shed along with 700 part-time ones. The company has claimed it will run out of cash by next January if the re-organisation fails.

Aer Lingus has an €800 million cash pile available to it, according to Ryanair. Mr O'Leary disputed Aer Lingus's claim that much of the cash is committed to aircraft financing packages. He said that if this was the case the airline would be able to reschedule the loans to preserve cash for day-to-day use. He added that if Aer Lingus was in danger of running out of cash it would be offering cut-price fares to stimulate revenues.