Ryanair joined other airlines on Tuesday in demanding that the European Commission step into a row over an Italian government plan to cap fares on some domestic routes.
In addition to a surprise windfall tax on banks, prime minister Giorgia Meloni’s rightwing government last week detailed plans to cap fares on flights between mainland Italy and islands Sicily and Sardinia, after ticket prices soared 70 per cent on those routes.
Airlines responded furiously to Ms Meloni’s proposals in the latest clash between her administration and the corporate world.
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Trade body Airlines for Europe (A4E) called on Brussels “to clarify with Italy that this intervention impacts the free and deregulated air transport market in Europe”, according to a letter seen by the Financial Times.
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“We are strongly concerned that if this law is adopted, it could set a precedent and lead to a domino effect resulting in similar regulations being adopted in other EU member states,” A4E managing director Ourania Georgoutsakou wrote.
Capping fares on these routes would “violate” the rights of airlines “to compete wherever possible, set prices and define services as they see fit”, said Ms Georgoutsakou.
Ryanair, Italy’s biggest carrier, warned that the move was illegal and argued that it would ultimately drive up prices by forcing airlines to cut back.
“If the Italian government wants to reduce fares to the islands, they should lower costs which would bring more capacity and more passengers at lower average fares, even during peak seasons,” said Ryanair.
The Irish giant flies between the Italian mainland and Alghero and Cagliari airports in Sardinia, and Catania and Palermo in Sicily.
Eddie Wilson, chief executive of Ryanair DAC, the largest airline within the group, predicted that price interference would bring less capacity, job losses and higher fares for people in Sardinia and Sicily.
Ryanair maintains that the Italian approach, of using low fares to calculate the price cap, would prompt airlines to limit capacity during the winter when flying is cheaper, ultimately resulting in higher prices for all passengers.
The company added that it had given the Italian government proposals for Sicily and Sardinia that it predicted could bring a total of five million extra tourists between the two islands.
“This law will have a hugely detrimental effect on those plans,” said Mr Wilson. “This government needs airlines’ seat capacity to support its plans and to turn Italy into Europe’s number one tourist destination.”
Affordable prices
The commission said that it was seeking clarifications from Rome, adding that price capping was rarely an effective means of achieving affordable prices.
“The commission supports measures to promote connectivity at an affordable price in line with EU internal market rules,” said Adalbert Jahnz, a commission spokesman. “Sustainable competition with free price setting is usually the best guarantor of affordable prices in the EU’s highly successful and liberalised transport market.”
Legislation on the European air travel market allows for price regulation to and from remote regions “only in specific cases ... to ensure both territorial connectivity and affordability”, he added.
Italian officials blamed the media for “inflating” the issue saying it was normal for the government to make sure prices did not rise excessively between the mainland and its islands.
Italian officials said economic development minister Adolfo Urso would meet airline representatives and industry associations to discuss the matter in September. — Copyright The Financial Times Limited 2023
