Compensation' levy nets Ryanair €120m

Sat, Feb 2, 2013, 00:00

Passengers paid Ryanair up to €120 million last year through the €2 “compensation” levy introduced by the airline in the wake of the volcanic ash crisis.

Earlier this week the airline warned that fares could increase further following Thursday’s European Court of Justice ruling which found that Ryanair was liable for costs incurred by passengers due to flight cancellations arising from the 2010 volcanic eruption.

The estimated €120 million generated last year is in addition to revenue raised by the levy between April 4th, 2011, when it was introduced and the end of that year. While the airline has raised well in excess of €100 million through the charge, it has reimbursed customers €27 million in compensation related to the ash cloud.

Cancellations

However, Ryanair said this figure did not include other costs related to the cloud, as well as other payments related to delays and cancellations caused by events beyond its control. The airline declined to give a figure for how much it has paid to customers in additional compensation.

Ryanair introduced the levy to fund the cost of compensating passengers for events outside the airline’s control, such as volcanic ash, snow closures and strikes in various airports.

The charge refers to European legislation governing airlines which obliges air carriers to compensate passengers for meals, accommodation and costs incurred if a flight is cancelled due to “extraordinary circumstances”. Ryanair argues that the law is unfair and discriminatory. It says that other players in the travel industry, such as travel insurers, are not bound by similar directives.

On Thursday, the European Court of Justice ruled in favour of Dubliner Denise McDonagh against Ryanair.

Volcanic eruption

Ms McDonagh claimed that she should be compensated for costs following the cancellation of her flight from Faro to Dublin on April 17th, 2010, because of the volcanic eruption.

Flights between continental Europe and Dublin did not resume until April 22nd and Ms McDonagh could not return home until April 24th. She claimed the airline owed her €1,130.

Ryanair disputed the claim, arguing that events were beyond their control.

Ryanair carried 79 million passengers in 2012. While this would suggest that revenue generated by the levy between 1st May 2011 and the end of 2012 could potentially be close to €270 million, not all passengers were charged the €2.

For passengers who paid Ryanair’s lowest advertised fare, the €2 levy was reduced to zero in order for the price to qualify as the lowest advertised fare. According to Ryanair, this represented about 20 per cent of all bookings in 2012.

The airline also pointed out that a large proportion of 2011 flights had been booked before the introduction of the levy.