Taxes and charges

I hope the FT won’t object to my reproducing some of their premium subscriber-only content here – a comment piece from today’s newspaper ab0ut Ryanair boss Michael O’Leary that is spot on.

Michael O’Leary is not someone to let an inconvenient truth obstruct a higher public relations mission. The “unacceptable face of capitalism”, as Mr O’Leary’s Irish critics have dubbed Ryanair’s chief executive, has launched a salvo against airport fees in the UK generally and BAA in particular, which owns Stansted, Ryanair’s UK base. Because they are high, Mr O’Leary is slashing winter flights and moving jets elsewhere.

This is disingenuous. Ryanair, like all airlines, is cutting winter capacity. Furthermore, Stansted has never charged airlines as much as its regulators allow. Last year, the fee cap was set at £6.44. Stansted charged £5.50. This gap is a consequence of the bargaining power of its main users, Ryanair and EasyJet, and the competition it faces from other European airports.

Unlike long-haul carriers, which need to maintain feeder routes into their hubs, low-cost carriers run a series of point-to-point businesses. Aircraft are therefore mobile assets that can be parked wherever and whenever it is cheapest or most profitable to do so. Ryanair is only responding to market forces. When summer demand returns, so will the aircraft. As for UK passenger taxes, these are set to rise by 10 per cent to £11 per passenger in November, which Mr O’Leary says damages “London and UK tourism and the British economy generally”. It is true that UK duties are a European anomaly. Yet the marginal effect of that increase on a holiday’s total cost is minuscule.

The 9 per cent depreciation of sterling against the euro over the past 12 months has had a far greater impact – and may even encourage more holidaymakers to visit Britain on Ryanair than it has stopped others travelling to Europe. Mr O’Leary wants to have his cake and be applauded for eating it too.

There’s a lot of bad in BAA, for sure, but that doesn’t mean there’s a lot of good in Ryanair: O’Leary’s PR juggernaut, despite claiming to stand up for the rights of the passenger, ends up most of the time crushing any nuanced understanding of the issues.

We’d all be better served if Ryanair invested just a little bit more in customer service, if BAA stopped turning our airports into shopping malls – and if taxes on flying were charged, not on a flat rate per person, but on a sliding scale depending on how much floor-space that person’s seat occupied inside the aircraft. Small seat in 737: low tax. Flat bed in personal suite onboard A380: high tax. As well as being fair, it might just shut Michael O’Leary up for a while. Anyone got any better ideas?

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