Ryanair 2011 Annual Report Download - page 66

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of Internet check-in and kiosks combined with the reduction in the number of bags carried by passengers, are
expected to enable Ryanair to achieve further reductions in airport handling costs.
Airport Charges
As with other airlines, Ryanair must pay airport charges each time it lands and accesses facilities at the
airports it serves. Depending on the policy of the individual airport, such charges can include landing fees,
passenger loading fees, security fees and parking fees. Ryanair attempts to negotiate discounted fees by
delivering annual increases in passenger traffic, and opts, when practicable, for less expensive facilities, such as
less convenient gates and the use of outdoor boarding stairs rather than more expensive jetways. Nevertheless,
there can be no assurance that the airports Ryanair uses will not impose higher airport charges in the future and
that any such increases would not adversely affect the Company’s operations.
With respect to Ryanair’s bases in Ireland, the DAA has recently completed a second terminal
(“Terminal 2”) at Dublin Airport. When this was first announced, the DAA estimated that the proposed
expansion would cost between 1170 million and 1200 million. Ryanair supported a development of this scale;
however, in September 2006, the DAA announced that the construction of Terminal 2 would cost approximately
1600 million. Subsequently, the cost of the new infrastructure rose to some 11.2 billion. Ryanair opposed this
expansion at what it believed to be an excessive cost.
The CAR is responsible for regulating charges at Dublin Airport. In late September 2005, the CAR
approved an increase in airport charges of more than 22% (effective January 1, 2006). On March 30, 2006,
following an appeal by the DAA, charges at Dublin Airport were increased by an additional 3%. On September
5, 2006, the CAR announced the launch of a public consultation to review and obtain feedback on the levels of
airport charges at Dublin Airport. In September 2007, the CAR announced its decision not to change the cap on
airport charges but appeared to allow approximately 11.2 billion of additional planned capital expenditures
(including approximately 1800 million for the new terminal) to be counted towards the regulated asset base,
enabling the DAA to substantially increase charges from 2010 onwards. Ryanair challenged this decision in the
Irish High Court but was unsuccessful. The High Court did, however, confirm that the CAR’s decision was a
“determination” within the meaning of the Aviation Regulation Act 2001 and that Ryanair was therefore entitled
to appeal this decision to an independent Appeal Panel established by the Minister for Transport.
In December 2008, the Appeal Panel issued its decision in which it criticized the CAR for its “passive
approach” to regulating the DAA monopoly and found that the new terminal (Terminal 2) was “considerably
oversized” and that DAA should have to bear the full risk for that over-sizing. Despite the Appeals Panel’s
findings, the CAR has refused to reduce airport charges.
In December 2009, the CAR issued its decision on charges at Dublin Airport for 2010-2014 and as a
result, airport fees per departing passenger increased by 27% in May 2010, from 113.61 to 117.23, and
increased by a further 8.0% in April 2011 to 118.64 following the opening of Terminal 2 in November 2010.
However, the Appeal Panel, following a request from Ryanair, ruled on June 2, 2010, that the CAR should
require the DAA to introduce differential pricing for the use of the existing Terminal 1 and the new Terminal 2.
In July 2010, under pressure from the DAA and Aer Lingus (the main user of Terminal 2), the CAR decided not
to follow the Appeal Panel’s ruling and not to mandate the introduction of differential charging at Dublin
Airport.
As a result of rising airport charges and the introduction of an Air Travel Tax of 110 on passengers
departing from Irish airports on routes longer than 300 kilometers from Dublin Airport (12 on shorter routes).
Ryanair reduced its fleet at Dublin airport to 13 during Winter 2010 (down from 22 in Summer 2008 and 20 in
Winter 2008). The introduction of the aforementioned 110 tax has likely had a negative impact on the number of
passengers traveling to and from Ireland. The DAA has reported that passenger volumes fell by 13% in 2009,
13% in 2010 and by a further 7% in the period January 1, 2011 to March 31, 2011, in each case compared to the
prior-year numbers. Ryanair believes that this is partly reflective of the negative impact of the tax on Irish
travel. Ryanair has called for the elimination of the tax to stimulate tourism during the recession. The Company
has cited the example of the Dutch government, which withdrew its travel tax with effect from July 1, 2009. The
Dutch travel tax had ranged from 111 for short-haul flights to 145 for long-haul flights and had resulted in a
significant decline in passenger volumes at Schiphol Airport, Holland’s main airport, according to data
published by the airport. Ryanair also complained to the European Commission about the unlawful
differentiation in the level of the tax between routes within the EU. From April 2011 a single rate (13) of the Air