The European Commission ruled yesterday that cut-price rates offered exclusively to Ryanair for using Charleroi Airport, in southern Belgium, were illegal, and ordered it to repay about £3m in subsidies.

That decision will have ramifications for low-cost air travel across Europe, with millions of travellers facing higher fares.

While budget airlines such as Ryanair may have no choice but to raise their fares to cover increased airport charges, national carriers such as British Airways and Air France could use the ruling as an opportunity to push up their prices.

Air France and Spanish carrier Iberia have received millions of pounds in state aid in the past, but have not yet been asked to repay it by the European Commission.

For this reason alone, one can have every sympathy for Ryanair's chief executive Michael O'Leary.

In making its decision, the European Commission rejected claims that it would damage the development of low-cost airlines in Europe and would lead to the end of cheap fares.

However, transport commissioner Loyola De Palacio conceded that because of the ruling, Ryanair may be forced to raise its ticket prices by between £4 and £5.50.

But she said: "A low-cost airline which is in good financial health must be able to offer cheap fares without using state aid.

"The commission is convinced that Ryanair is, and will continue to be, quite capable of offering its services at low cost, just as other low-cost carriers do and will continue to do."

Ms De Palacio said: "The commission is committing itself firmly to promoting increased competition, which will enable low-cost carriers to establish themselves throughout the EU, subject to compliance with uniform rules on competition between carriers and for the maximum benefit of consumers.

Teesside International Airport, from where Ryanair operates flights to Dublin, will be monitoring the effect of the decision on budget carriers.

But John Waiting, business services manager at the airport, said: "We do not believe this decision will have a major impact on the airport, as we are 75 per cent privately owned.

"As we understand it, this decision only affects airports that are state owned, such as Charleroi Airport in Belgium."

Ryanair is already believed to be planning an appeal to the European Court of Justice in Luxembourg.

Mr O'Leary said: "We believe the appeal will be supported by many other low-fares airlines, regional airports and consumer groups.

"The commission should not be interfering in the operation of a free market."

But bmi legal director Tim Bye said: "bmi has always fought against state aid in the aviation industry. This case is no different to many others we have criticised. State aid is state aid, whether it is received by Air France or by Ryanair."

EasyJet chief executive Ray Webster said: "This ruling is good news for Europe's airlines as it removes a very substantial degree of uncertainty that has been hanging over European aviation for some time.

"It also makes a very clear commitment to the development of the low-cost airline sector.

"We are particularly keen to ensure that the commission does not inhibit any airline, be they traditional, charter or low-cost, from seeking and obtaining differential charges - provided the charges relate to the cost of provision of the specific services used."

* The advertising watchdog has criticised Ryanair for the wording used in a promotion.

The advert, which appeared in a national newspaper shortly before bonfire night, started with the headline "Fawking great offers!".

There were 47 complaints to the Advertising Standards Authority from people who found it offensive