French court hits Ryanair with €9m penalty

A French court has ordered Ryanair, Europe's leading low-cost airline, to pay more than €9m in damages and fines for breaking local labour laws when it employed staff at a now-closed base in the south of France on Irish contracts.

The court in Aix-en-Provence ignored a plea from prosecutors to fine Ryanair the value of the four aircraft it flew from the base, imposing instead a fine of €200,000. But lawyers involved in the case said the judgment included about €9m that Ryanair must also pay in damages and interest to social security, pension and employment agencies and trade unions affected by its failure to pay French labour charges.

The court judgment said Ryanair's operation amounted to "veritable social dumping", the news agency AFP reported. "The level of social charges in France are 40-45 per cent [of wages] for the employer, against 10.75 per cent in Ireland, an issue of unfair competition against other airlines that respect national legislation," it said.

Ryanair, which accused the authorities of using the case to protect struggling Air France from competition, said it would appeal against the decision "all the way to the European courts".

It added: "These people were employed on Irish contracts, operating on Irish registered aircraft [defined as Irish territory] and have already paid their taxes, social taxes and state pension contributions in Ireland, in full compliance with Irish and EU regulations."

The penalties far exceeded similar rulings in 2010 and 2012 against Ryanair's low-cost rivals easyJet and CityJet, which had to pay about €1.5m and €1m respectively. All three airlines still fly to French destinations.

The case stemmed from Ryanair's use of Irish contracts when it set up an operational base employing up to 127 people of different nationalities, including French, at Marignane, near Marseille, from 2006 until the end of 2010, when it closed following the court action taken against the airline.

The move enabled Ryanair to avoid paying France's high social-security charges and other taxes on labour. But the agencies and unions that backed the case against it said the set up was a fiction, arguing that Ryanair's offices, equipment and management based at Marignane showed its operation was implanted in France and should be subject to French rules. The court agreed, convicting the airline of "concealed employment".

But Ryanair said a 2006 French decree that applied French social security charges to foreign airlines was "specifically introduced as further state protection for the lossmaking Air France" against which it and other low-cost airlines were competing.

"Ryanair believes there is a clear contradiction between current EU employment regulations under which these Irish workers paid their taxes and social taxes in Ireland, and the 2006 French decree," it said.

One of those involved in the case against Ryanair was the American pilot Morgan Fischer, who was operating out of Marseille at the time. In 2010, Mr Fischer wrote a letter to the Financial Times suggesting Michael O'Leary, Ryanair's outspoken chief executive, could be replaced by a "probationary cabin crew member" to save costs.

It followed a comment by Mr O'Leary that airlines could "save a fortune" if flight attendants replaced co-pilots on aircraft on which "the computer does most of the flying". Mr Fischer subsequently resigned from Ryanair after being reassigned from Marseille to a base in Lithuania.

SNPL, the French pilots' union, said it was satisfied with the court decision.

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