Ryanair’s O’Leary: Hungarians Suffer From ‘Idiotic’ Excessive-profits Tax

Interview

Michael O'Leary, CEO of Ryanair, makes a point ahead of his Budapest press conference.

Michael O’Leary was at his clowning best for the first minute of his Budapest press conference on September 13, grimacing, gesticulating, and waving a placard for the cameras. But his message was deadly serious: “Scrap ‘excess-profits’ tax on loss-making airlines.”

“I’m sorry that today we don’t have good news,” the Ryanair chief executive said after his PR antics were over.

The Dublin-based low-cost carrier had planned to launch its “biggest ever” winter schedule from the Hungarian capital this winter, with 10 new destinations and another aircraft at Budapest airport.

“Sadly, however, those plans have now fallen at the altar of the Hungarian government’s decision to impose a ludicrous and idiotic “excess-profits” tax on an airline sector which is reporting record losses,” O’Leary lamented.

Instead, Ryanair would be reducing the destinations served from Budapest from 53 to 45 from October 1 while reducing the frequencies on another seven. (See box for more on this.)

He said that the carrier’s passenger numbers using Budapest are set to fall to a “little below four million” this year against the 4.5 million expected earlier and 5 million in 2023.

The “excess-profits” tax referred to by O’Leary is the government-imposed charges on airport handling companies, effective from July 1, of HUF 3,900 for passengers traveling to European destinations and HUF 9,750 for those heading outside the continent. O’Leary said these had “inevitably” been passed on to the airlines.

The Irish CEO stressed that Ryanair “respected the right” of the Hungarian government to impose an “excess-profits” tax on sectors, such as oil and gas, “which are making excess profits.”

However, “what we don’t understand is how you can levy an excess-profit tax on the airline sector, which has been reporting record losses over the last two years because of air travel being shut down by COVID-19 and the impact of Putin’s invasion of Ukraine,” he argued.

As a result of the restrictions, Ryanair had reported losses for those two consecutive years, an unprecedented performance in the last 30 years of the budget carrier’s existence.

As an upshot of the new levies, Ryanair, in turn, had “no choice” but to increase ticket prices, including those who had already booked flights to and from Budapest before the taxes were announced in early June. (The carrier promised to refund the earlier fare in full if passengers opted not to pay the increase. Ryanair said earlier that only 3% of passengers had opted for the refund.)

This latter move had created another “minor dispute” with the Hungarian authorities, resulting in the Consumer Protection Authority issuing a fine of HUF 300 million on the carrier. Ryanair has appealed the fine, even though O’Leary is confident it will lose in Hungary. He pledged to take the case to the European court if necessary.

“We have politely pointed out to the Hungarian government that under EU regulations, the airlines are free to price our services as we see fit, and since we’re making record losses, we cannot afford to pay an excess-profit tax,” he said, adding that this would hit “Hungarians, Hungarian families and Hungarian tourism” most of all.

The additional aircraft originally planned to be based in Budapest would instead be located in a neighboring country.

“Hungary, as a result [of the new tax], has become a much more expensive destination this winter. At a time when neighboring countries like Austria, Slovenia, Slovakia and Romania, are cutting costs to try to recover their pre-COVID tourism traffic, Hungary is going the other way and making itself more expensive,” O’Leary claimed.

While Ryanair had hedged its fuel prices up to next spring, he said fares would have to rise “by about EUR 5” next year to cover increased kerosene prices into 2023-24.

On the positive side, the carrier did not intend to close its base in Budapest, having “worked too hard to open it,” though the company would reconsider its plans next spring and could not rule out more cutbacks, he warned.

Michael O’Leary on Ryanair’s PR, Tax policy, Brexit and Politicians

After the main press conference, the Budapest Business Journal sat down with the former Irish accountant, who sometimes can’t resist a little hyperbole.

BBJ: Didn’t you launch an ‘Always Getting Better’ program some time ago?

Michael O’Leary: That was a long time ago!

BBJ: But you’re not getting better now in the eyes of the Hungarian public.

MO: What?! People are selling their firstborn child to be able to get on a Ryanair aircraft in Budapest airport. They’re desperately trying to get off expensive Wizz and EasyJet flights.

BBJ: But what about the Hungarian government [and its budget deficit]?

MO: If you really want to levy an excess profit tax, levy it on an industry that is making excess profits.

BBJ: What have been the main effects of Brexit? Has it reduced demand for flights between Central Europe and the United Kingdom?

MO: Brexit has been very damaging to the U.K. economy generally. I think, generally, non-British people in the U.K., the Irish, Romanians and Poles, felt less welcome. But there has also been a dramatic recovery in the economies of Poland and Romania. Lots of people left the U.K. as a combination of Brexit and COVID, went back home, and have now got jobs at home where essentially you have full employment, and they don’t want to go back to the U.K.

The U.K. economy is really struggling for labor in retail, hospitality, agriculture. It is going to do very badly for the next year or two, not so much because of Brexit [per se], the British were free to choose to leave the EU, but they should have left with a free trade deal with the Union.

It was Johnson and the other idiots who he appointed to his cabinet, and they insisted on the hardest possible post-Brexit deal, which has been very damaging to the U.K. economy. And it will continue to be damaging until Liz Truss or whoever comes after works out that you can have Brexit, but at least let’s have the greatest amount of freedom of movement of labor and capital between the U.K. and the European Union. That’s the only way to deliver Brexit. Leave the EU if you want, but for [expletive]’s sake, negotiate a proper free trade deal which allows people to move freely between the U.K. and the EU.

BBJ: Do you have a politicians’ idiot ranking?

MO: [Laughs.] Top of the tree would be [expletive] Johnson and anybody in the ERG [the pro-Brexit European Research Group] voting for a hard Brexit. The Hungarian company would come a close second. No, actually, third now, because the Dutch government will have leapfrogged them with their EUR 30 environmental tax from January 1. Look, most politicians are idiots; you have to be an idiot to be a politician in the first place.

Ryanair Routes Affected Serving Budapest

Eight canceled routes: Bordeaux, Bournemouth, Cologne, Krakow, Kaunas, Lappeenranta, Riga, and Turin. Six routes at reduced frequencies: Amman, Bristol, Prague, Pisa, Sofia, and Warsaw. Michael O’Leary stated seven routes would be affected in his press conference, but in an email to the BBJ, Ryanair only listed six. When asked to clarify, Ryanair failed to answer. Some Hungarian media outlets listed Tel Aviv as the seventh route affected.

This article was first published in the Budapest Business Journal print issue of September 23, 2022.

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