The decision against Ryanair sets a precedent across the Continent that is expected to lead to dozens of airports being forced to stop subsidising “no- frills” airfares.

The Commission ordered Ryanair to refund illegal subsidies of up to €4.5 million (£2.74 million) from its special contract with Charleroi airport, south of Brussels, declaring that it broke EU laws on state aid.

The Commission admitted that its decision, which was prompted by a complaint from the main airport in Brussels, would lead to an immediate increase in return flights to Charleroi of between €6 and €8.

It believes, however, that by promoting open competition between airlines flying to regional airports, its ruling could in the longer term lead to lower fares. With near monopolies in many small airports, Ryanair has become very profitable for a fairly small airline, making £165 million last year.

Loyola de Palacio, the European Transport Commissioner, said of the ruling: “It will help the development of low-cost operations, which are clearly what consumers want.”

She said that the deal between Ryanair and Charleroi had been “hushed up, it was not done in good faith.

“We would like to encourage the development of regional airports and enable low-cost airlines to compete in an atmosphere of openness and transparency.”

Michael O’Leary, the chief executive of Ryanair, said that fare increases would be double that predicted by the Commission, would lead to fewer passengers and force Ryanair to close some routes to the airport.

“This decision is a disaster for consumers, a disaster for low-fare air travel all over Europe and a disaster for publicly owned airports that can no longer compete with private airports,” he said. “The Commission is interfering in a free market that works perfectly well. The only people who are happy are the Commission, the high- cost airlines and high-cost airports.”

The Commission ruled that Ryanair must repay €1 million, equivalent to the 50 per cent discount that it was given on landing charges by the Wallonia regional government, which is the main owner of Charleroi airport.

It would also have to repay some of the €4 million in discounts offered by the airport itself on such things as baggage handling charges, staff training and marketing. Ryanair may also have to repay some of the incentives that the airport gave it for staff recruitment, training and accommodation given each time it opened a new route to Charleroi.

The Commission said that it needs more information to decide exactly how much Ryanair must repay, but it said that it expects it will have to repay between 25 and 30 per cent of the total €15 million subsidies it received.

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