Michael O’Leary closes maintenance hub after authorities rule staff must be employed on French, not Irish, contracts.

Ryanair boss Michael O’Leary, the unflinching king of cost-cutting, may finally have met his match in the strictness of French employment law. The Irish low-cost airline will close its only French base in Marseille this week in the latest round of a bitter war with French authorities.

O’Leary has been engaged in a stand-off with France since pilots’ unions and the state took legal action against him for employing Marseille-based crew on Irish contracts rather than paying higher social security and tax in France. It is the first time Ryanair, Europe’s biggest low-cost airline, has faced legal action of this kind.

A furious O’Leary, fearing large fines, said he would remove his staff and from Tuesday, Ryanair will no longer have its Mediterranean hub in the French port. Its aircraft and 200 jobs will be moved to rival airports in Spain, Italy and Lithuania in protest at what O’Leary called the “ill-judged” ways of France.

Ryanair launched its Marseille maintenance hub in 2006, boasting that it would open up Provence to tourists and “save” the French from Air France’s high fares.

The French low-cost market, with its large number of UK second-home owners, is a key growth area for budget airlines like Ryanair and easyJet. Local French mayors, airports and chambers of commerce had offered financial incentives to bring low-cost airlines to the regions.

Ryanair quickly became the second biggest carrier in Marseille, bringing in 1.7m passengers last year. But France’s second largest pilots’ union complained that staff based in Marseille were working under Irish contracts and paying no taxes in France.

O’Leary, who saved 30% on high French social charges by using Irish contracts, said he was abiding by European law because his workers were mobile and worked on “Irish registered aircraft defined as Irish territory”.

French courts ruled against Ryanair, saying that employees of foreign airlines living in France come under French social security and tax law.

The British budget airline, easyJet, which intends to expand in France this year, has also fallen foul of French law. Last year it was fined €1.4m for breaching French labour law by hiring 170 staff under British contracts at Paris’s Orly airport.