Ryanair is "optimistic" that a French appeal court will overturn an earlier ruling that its service between London and Strasbourg benefited from illegal state aid.

The airline's appeal on the matter was heard yesterday at the Court of Appeals in Nancy, with the president of the court indicating he would make a decision before the end of this month.

The ruling is likely to be superseded, however, by a decision due from the European Commission in January on Ryanair's relationship with Charleroi airport in Belgium. The Commission is expected to draw up a blueprint on how all such deals should be concluded in the future.

Ryanair chief executive Mr Michael O'Leary said the firm was "pleased" with how the French hearing had gone and expressed optimism that "the court will find in favour of low fares for ordinary people".

Mr O'Leary was speaking from outside the court, where scuffles broke out among people lured by adverts in regional newspapers promising free airline tickets for those who turned up. Ryanair said it was encouraged by comments made during the hearing by the government-appointed commissioner, who acts as an independent adviser to the court.

The commissioner, whose views do not have to be accepted by the court's president, said Strasbourg authorities had acted as an "advised private investor" when entering into a subsidy deal with Ryanair last year.

The airline said this meant he judged the relationship to be legal, rather than constituting state aid. Ryanair also said the commissioner had found the Strasbourg administrative tribunal, which made the earlier decision, did not have jurisdiction over commercial disputes of this nature.

In a separate development, Ryanair also said yesterday that it had entered into a sale and leaseback deal for up to 10 Boeing 737-800 aircraft to cater for its expanding network. The airline said the aircraft, to be delivered between now and March 2004, were worth $518 million (€423 million). Under the deal with RBS Aviation Capital, a unit of Royal Bank of Scotland, the aircraft will be leased back for seven years.