Working the numbers on Ryanair's new £2 cancellation charge
It's the way of the world - airlines often have to cancel flights for reasons beyond their control; Acts of God, strike action, the Spanish. When such instances occur in Europe, an EU law comes into play - EU261 - that states airlines have a duty of care to passengers stranded as a result, who must be provided provisions such as accommodation and meals.
Despite the fact that that's the law and has been for sometime, Ryanair keep acting surprised by the fact they have to comply with it. Campaign for change is one thing, and Ryanair are currently doing just that; they want airlines to be only responsible for matters they have control over - cancellation through mechanical failure, and so on.
But now Ryanair have announced they're to begin charging a £2/2€ levy per person per flight, to cover the cost of complying with the law. Said Ryanair:
"It is clearly unfair that airlines are obliged to provide meals and accommodation for passengers simply because governments close their airspace, or air traffic controllers walk off the job, or incompetent airports fail to clear their runways of snow."
You can see their point; it's not their fault in these circumstances. Perhaps the travel insurance industry should instead be responsible for their customers in unforeseeable situations, since that's the point of travel insurance in the first place.
But for us, that's not the issue. The problem is Ryanair presenting the legal requirement for duty of care as some new and unexpected fee; as if management has never thought to budget for such eventualities in the first place.
easyJet responded to Ryanair's hijacking of their own flights by stating:
“EU 261 places an unfair burden on airlines and easyJet would like to see it reformed. However, easyJet has no plans to follow Ryanair in applying an the charge on our passengers.”
That's probably because easyJet fares reflect some modicum of contingency planning, instead of stripping it out in order to make their point and support their own campaign, whip up headlines and continue to make their prices appear artificially low.
So there's that. And if you care to indulge us in a spot of simple maths;
• Ryanair claim that complying with EU 261 cost them more than £88 million last year (100 million Euro) in a 12 month period that saw ash clouds, strikes and winter weather impact severely on European flights; it's generally agreed this was an exceptional year in terms of disruption
• Ryanair believe 78 million passengers will fly with them in the next year; let's assume that means 78 million single flights, instead of assuming each passenger may make several flights with Ryanair)
• Ryanair's new levy therefore means an additional revenue of at least 156 million Euros (more where flights are bought by UK-based customers), even though the worst year of disruption only saw them spend 100 million Euros
So in a worst case scenario - if the events of last year were to happen again this year - Ryanair would make at least 56 million Euros from the new charge. However, the best case scenario for Ryanair is also the more likely - that there'll be no flights cancelled by dust clouds and airports will be better prepared to deal with adverse weather - and so Ryanair are likely to pocket most of the money raised.