‘Our approach went beyond providing a business plan to justify the agreement from the airport’s perspective’

Personal profile
Name: Agnès Dufour
Position: Analyst
Oxera career: Intern 2014, Analyst 2015
Education: MSc Economics & Management
London School of Economics;
BSc Applied Economics,
Université Paris Dauphine

Project profile
Client: Ryanair
Sector: Transport
Project: Profitability assessment
Skills: Corporate Finance, Competition

Q: Agnès, tell us about the work you did on the Ryanair project.
A: We were asked to assess whether the agreement that a regional airport had signed with Ryanair was expected to be profitable at the time of signature.

This was in the context of an investigation by the European Commission regarding alleged state aid that the airport might have granted to Ryanair. If the arrangements were found to constitute state aid, this would raise potential concerns about distortions of competition in the passenger air transport market.

Q: How did we help the client, and what role did you play?
A: My role involved extracting the relevant information from the agreement and, in combination with financial statements from the airport, calculating the expected profitability of the agreement. I was also in charge of finding reliable sources of economic indicators to support the assumptions made in calculating forecasts.

Senior colleagues gave me guidance on how to derive credible forecasts from the airport financials, and especially in applying the appropriate econometric regressions.

We submitted the results of our report to the European Commission as part of supporting evidence for the defence claim.

This profitability assessment helped to show that the agreement would have been profitable based on the traffic forecasts specified in the contract. The European Commission therefore concluded that Ryanair did not receive any aid, and thus did not have to pay back anything to the airport.

Q: How do you think we made a difference?
A: Our approach went beyond providing a business plan to justify the agreement from the airport’s perspective. We double-checked that the traffic assumptions presented in the contract made sense based on industry growth forecasts, and we also conducted multiple sensitivity checks to ensure that our results were not dependent on the assumptions made.

This allowed the European Commission to have confidence in the robustness of our results.

Q: What did you learn personally?
A: Rigour and transparency are essential in our job. I learned that in making a compelling case, detailing your thought processes and providing robust analysis makes all the difference.

In terms of skills, I gained knowledge of corporate finance as I had to understand which variables were relevant in building our profitability model. I also gained skills in Excel modelling.

The project enabled me to apply my theoretical knowledge of corporate finance and economics in a legal litigation context. One of the most challenging parts was to explain complicated corporate finance principles in plain English for a non-economist audience.