|
Matthew Vella
The historic one euro-cent air ticket is finally here. Ryanair’s in town and its loudmouth chief Michael O’Leary, armed with a token George Cross flag, has already spelt out the uncomfortable future ahead for Air Malta.
Of course it’s wrong for national airlines to have a “social” function and fly to unprofitable routes, O’Leary says, quite expectedly for the former tax accountant who changed lowly Ryanair into Europe’s fastest growing aviation player.
“Air Malta haven’t done a very good job for tourism”, is O’Leary’s bold claim on the national airline, a claim as controversial as his general business tactics. For the McDonalds equivalent of aviation, O’Leary and Ryanair speak the language of MTV – they have accused airlines like British Airways of behaving like a “gangsta” and of “pimping” passengers by adding extra charges for fuel. They get cheap advertising by picking up fights and courting controversy, the ruthlessly corporate way.
But O’Leary is also ruthless in cost-cutting: he has banned head office staff from charging mobile phones at work on the grounds that it was costing Ryanair too much money. Crew are expected to pay for their own training, uniforms and meals. Maybe Air Malta should take a leaf out his book and stop its free air tickets to senior staff and directors – both present and past.
But when one considers O’Leary’s claim to The Times last week that the airline hasn’t introduced a fuel surcharge, the reality of how much of Ryanair’s add-ons truly reflect their cost base comes into question.
The truth is that low-cost airlines like Ryanair boost their aggressively advertised fares with increased charges. Customers who will buy Ryanair’s giveaway EUR0.01 fare will end up paying more – and the rest of the ticket will be subsidised through Maltese taxpayers’ money, the opportunity cost the government pays for generating more incoming travel to the island.
So a traveller flying to Pisa paying by credit card and needing to check in a single bag will end up with a bill of EUR88 – after tax, an airport charge, a baggage charge, a credit card payment fee and a “wheelchair levy” to cover the cost of carrying disabled passengers.
That includes EUR4.50 for each piece of luggage you take on the plane, each way. That means EUR9 for a return flight. You also pay EUR2.50 for using a credit card, each way. It doesn’t matter if you are paying for two or more passengers, you pay EUR5 for each passenger if it’s a return flight. And then there’s the taxes, fees and charges – EUR 88 in government and airport taxes, a combined insurance and wheelchair levy, and a passenger service charge. Malta’s taxes are by far the highest.
Indeed, these charges recount Ryanair’s own meteoric rise and how governments, lobby groups and consumers associations have rallied against the airline’s way of costing fares.
For example, Ryanair’s charges include its wheelchair levy, one of the most blatant examples of profiteering by levying a charge for the cost of transporting disabled passengers on to its planes. With multi-million profits, the airline still charged an extra EUR0.50 levy on every ticket to provide a wheelchair for disabled passengers. Ryanair was the only major airline operating in Britain to impose such charges.
While British Airways had declined to put a figure on the cost of transporting disabled passengers saying it absorbed those costs into ticket prices, EasyJet estimated that services for the disabled added no more than 10p to the price of a ticket.
Today the wheelchair levy is part of its insurance levy paid on each ticket – EUR5.54 – although the component which includes the cost of transporting disabled passengers to the plane is not explained.
In another media investigation into the low-fares airline, British newspaper the Guardian said Ryanair had been “quietly boosting” the price of its tickets through an “aviation insurance levy” on every passenger which raises far more than it spends on insuring its aircraft. According to the British newspaper, the GBP3.15 the airline charged on each passenger for insurance – after carrying 34 million passengers in a year – meant the surcharge generated GBP108 million on an annualised basis.
Inquiries by the Guardian later revealed that Ryanair only paid a fraction of this in insurance, which according to an airline spokesperson was “one element in a broad category” of costs amounting to GBP66 million, up to March 2005. Assuming insurance levy remained at a constant level, passengers would have paid GBP87 million in surcharges over the same period.
The truth is that for all the advertising of cheap fares, there is no real idea of how much carriers like Ryanair raise from add-ons to the fares. Ryanair introduced the insurance levy after the September 11 attacks in line with other airlines, after insurance costs for aviation were hiked. Initially, it set a GBP1.85 charge but has since raised it by 70% - over a period in which experts say the cost of cover has fallen to relatively normal rates.
So if Ryanair’s insurance charges turn out to be far higher than the insurance payments they actually incur, the chances are that this is after all, another cost in disguise.
And then there’s Ryanair’s anti-trade union stance – only recently O’Leary has threatened to pull out of several Spanish airports in response to striking workers in Girona, Spain. ITF aviation section secretary Ingo Marowsky has promised that the transport union federation will be there to follow Ryanair everywhere it goes. With striking employees, national TV channels witnessed Ryanair management’s pitiful attempts to minimise the impact – by not checking in luggage and by forcing travellers, including families with children, to re-pack suitcases into refuse bags before being allowed to board.
You’d have to consider all this against Ryanair’s interim results statement published last Monday, which pushed shares to a record high of EUR9.29. Net profits rose 39 per cent to a record EUR329 million in the six months to September 30, while total revenues were ahead by a third to EUR1.26 billion and passenger numbers increased by 23 per cent to 22.1 million. It expects profits after tax for the year to March to rise 16 per cent to EUR350 million.
This is ultimately the face of cost-cutting capitalism, but it also comes with O’Leary’s opposition to emissions trading schemes to offset his airline’s contribution to greater CO2 emissions, his anti-trade unionism, and his practice of raking government and airport subsidies to undermine legacy carriers.
Matthew Vella was on the first inaugural flight of RyanAir.
|
