The low-cost airlines may include the new tax in their ticket prices, but that will probably not be the most adverse consequence of the cabinet’s decision. That is because the pricing logic of Wizz Air, Ryanair, Easyjet and others is based on aircraft utilisation. Therefore, the new tax will not result in a direct price rise but an increased number of cancelled flights, experts believe.
Hvg.hu summed up the relevant findings of Bank360 in THIS article. They say that Ryanair did not hesitate for long about what to do with the extra tax. They decided to increase each ticket’s price with the government-introduced 3,900 HUF (EUR 10) per passenger extra tax. The Government Office of the Capital City Budapest will decide whether that decision was lawful or not. However, that rule applies only to tickets booked before 4 June. They mentioned nothing about those passengers who bought their tickets after 4 June. As it turned out, it was not a coincidence.
The ticket pricing of the low-cost airlines is different from their big contestants.
The latter sum up their costs, add their margin and, thus, set the ticket price. Therefore, ticket prices do not change. Low-cost airlines are different. Their ticket price is continuously changing because it is linked to aircraft utilisation. The algorithm decreases the price provided there is no booking and increases it if there are purchases. That is why tickets are expensive in summer and are relatively cheap in January when nobody travels.
No low-cost airliners will operate flights making a loss
Therefore, companies will not add the government’s extra tax to the current ticket costs. In the case of Ryanair, for instance, Bank360 found summer tickets for 9 thousand HUF (EUR 2.5) or 11-12,000 HUF (EUR 3.5). That means the company did not automatically add the extra tax to each ticket. The high utiliSation rate of the aircraft compensates the airliner for the new tax. Therefore, no price increase is needed.
Of course, no low-cost airlines will operate flights making a loss. Although it can occur in late summer or early fall when the utilisation rate will fall drastically. Therefore,
multiple flights might be cancelled.
Ryanair, for example, did that in countries that introduced excess profits taxes or in the case of airports that changed their fees.
As a result, air travel will be riskier since airliners are free to cancel any flight that is due more than two weeks without an explanation. That is especially true for destinations where the prices are low, meaning their utilisation rate is low. Bank360 argues that the consumer protection probe launched by the government against Ryanair will make little difference regardless of the fine they may get.
What can we expect from other airlines?
Airportal.hu looked up what passengers can expect if they book at other airlines. Ryanair announced they would pass the excess profits tax on the travellers following the cabinet’s decision. That was followed by a public outcry. However, later it became clear that the company sticks to its General terms & conditions.
“If any government tax is introduced or increased after you made your booking,
you will have to pay the new tax (or any increase) before departure.
Or, you can choose not to travel and get a full refund of your booking cost. Similarly, if any such government tax is abolished so that it no longer applies to you, or is reduced, you can claim a refund of the abolished tax, or the reduction, from us.”
Similar regulations are in effect in the case of Wizz Air, KLM, Air France, Lufthansa, British Airway, Easyjet and Qatar Airways.
As we reported before, if the flight’s destination is the EU, the United Kingdom, Northern Ireland, Albania, Andorra, Bosnia and Herzegovina, North Macedonia, Iceland, Kosovo, Liechtenstein, Moldova, Monaco, Montenegro, Norway, San Marino, Switzerland, Serbia or Ukraine,
the excess profits tax’s rate will be 3,900 HUF (EUR 10.18) per passenger. In other cases, it is 9,750 HUF (EUR 24.88).
The excess profits tax concerns only passengers departing from Hungary. As a result, the decree does not apply to transit passengers.
Source: Hvg.hu, airportal.hu