O’Leary spells out rivals gains from UK air tax

Some illuminating thoughts from Ryanair chief executive Michael O’Leary today, after announcing more cuts in capacity at UK airports this winter. High profile announcement of winter cuts, in particular at London Stansted, have become the norm for Ryanair over recent years as it complains about airport costs and more recently the UK air passenger duty. Today it announced it would cut capacity 17% this winter at Stansted from November and by 16% across the UK as a whole. “There will be cuts at all our bases in the UK apart from a couple,” said O’Leary at a press conference in London today (Edinburgh and Leeds Bradford are the only two of its 11 UK bases where it will increase capacity this winter).

Thumbnail image for O'Leary.jpgWhat has become clear is a continued shift of a greater share of Ryanair’s activities into mainland Europe, with Spain and Italy key markets. It now has seven bases in Spain and eight in Italy, and in a market where growth remains restrained across many European carriers, Ryanair is one of the keys to the fast growth in these countries. Ryanair today pointed to intra-European capacity figures over the first four months of the year (from CapStats) showing Italy and Spain with the fastest rates of growth in seat capacity among European countries. This contrasts with a fall in seats on offer in the UK. 

The chief target in O’Leary’s sights is the UK’s air passenger duty, though with Germany embarking on a new departure tax and aviation likely to remain in the line of fire as European governments seek to raise revenue to tackle deficits, it touches on the wider of issue of whether in these cash-short times, aviation is used as a revenue generator or for wider economic growth.

“The way forward is not APD. The way forward is lowering costs and building runways in the south-east [of England], otherwise you are going to lose the business to other [countries].” Growth in Spain has been aided by Spanish policy to encourage new air services. “Spain is growing with worse economic conditions [than the UK], because they are lowering the cost of entry,” says O’Leary. “Its less than half the cost [to us] and the fares are higher from Barcelona. You are certainly saving at least €10 million [a year] just by moving those two aircraft [from Stansted]. If you scrapped the tourism tax it would be roughly the same as Spain. But its not just about the tourist tax, its airport fees.”

And in a final broadside against the APD in the UK and other countries, O’Leary dismisses the notion that passengers do not object to paying an additional €10 per ticket in taxes with typical honesty. “If people didn’t mind paying the extra tenner, I would have it off them long before it got to the government. If there was a way of extracting another cent out of a passenger, I would have done it. So the idea people don’t mind paying the €10 tax is absurd.”

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