Passenger Tax To Hit Ryanair's Investment In Aer Lingus

by Amanda Banks, Tax-News.com, London

04 November 2008

Ryanair Chief Executive Michael O'Leary has warned that the Irish government's decision to impose a flight passenger tax could damage its investment in the national carrier Aer Lingus.

Announcing the low-cost airline's half-year profits, which fell by 47% to EUR215m largely as a result of record high oil prices, O'Leary stated that the effect of the passenger tax would be relatively minor on Ryanair itself because most of its traffic originates outside of Ireland. However, he added that the tax "will seriously damage our investment in Aer Lingus, who are almost entirely exposed to Irish originating traffic and whose load factors are steadily declining."

Irish Finance Minister Brian Lenihan announced in the budget last month that a new air travel tax will be imposed at a flat charge of EUR10 per passenger, with shorter journeys attracting a EUR2 charge. The levy is due to be introduced in March 2009.

O'Leary also warned that the tax would result in Ryanair scaling back its investment in Shannon airport in Ireland's west.

"Our base at Shannon, where average airfares are less than EUR10 all winter long, will be particularly hard hit and we expect to reduce flights and traffic by up to 75% from November 2009 if this penal flat rate tax is implemented as announced," the Ryanair chief announced.

“This flat rate travel tax has already failed in the UK and Holland where traffic at many airports is in steep decline. It is inevitable that Irish traffic [and] tourism will suffer a similar decline next year," he argued.

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