Ryanair 2011 Annual Report Download - page 67

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Travel Tax has been introduced on all routes. In May 2011 the Irish Government announced that it would
abolish the Air Travel Tax, although no details were provided as to when this decision will be implemented. No
assurance can be given that the tax will be abolished or indeed that a higher rate of tax will not be applied in the
future, which could have a negative impact on demand for air travel. In June 2011, Ryanair proposed to the Irish
Government that it would deliver an incremental 5 million passengers per annum over a five year period in
return for reduced airport charges and the abolishment of the 13 air travel tax. As of July 22, 2011, the Company
has not yet received a response to this proposal.
Both the Belgian and Greek governments planned to introduce similar taxes; however, they have now
cancelled plans to introduce these taxes. The German government introduced an 18 passenger tax on January 1,
2011 for all departing domestic or short-haul passengers and a passenger tax of 125 for all departing passengers
on flights bound for southern Europe and northern Africa. In addition, the Austrian government introduced an
APD tax of 18 effective April 1, 2011.
In March 2007, the discount arrangement formerly in place at London (Stansted) airport terminated,
subjecting Ryanair to an average increase in charges of approximately 100%. The increase in these charges,
which was passed on in the form of higher ticket prices, had a negative impact on yields and passenger volumes
in the winter, resulting in Ryanair’s decision to ground seven aircraft. Ryanair responded to the increases by
filing complaints with the U.K. Office of Fair Trading (“OFT”) and the U.K. Competition Commission
(“Competition Commission”), calling for the break-up of the British Airports Authority plc (“BAA”) monopoly
and the introduction of competition in the London airports market. The OFT referred the matter to the
Competition Commission, whose preliminary findings were released in April 2008. The Competition
Commission found that the common ownership by BAA of the three main airports in London affects
competition and that a “light touch” approach to regulating BAA by the Civil Aviation Authority was adversely
impacting competition. The Competition Commission subsequently in March 2009, ordered the break-up of
BAA, a reorganization that will require the sale of both London (Gatwick) and London (Stansted) airports and
either Glasgow or Edinburgh Airport in Scotland. In October 2009, London (Gatwick) was sold to Global
Infrastructure Partners for £1.5 billion. In February 2010, this decision by the Competition Commission was
quashed by the Competition Appeal Tribunal on the basis of an alleged appearance of bias on the part of one of
the six members of the Competition Commission panel. However, in October 2010, following appeals from the
Competition Commission and Ryanair, the Court of Appeal overturned the Competition Appeals tribunal ruling
and reinstated the Competition Commission’s March 2009 decision to order the break-up of the BAA airport
monopoly. In February 2011 BAA’s request for permission to appeal the Court of Appeal ruling was refused by
the Supreme Court, putting an end to this appeal process. The Competition Commission meanwhile initiated a
consultation on the appropriateness of the March 2009 remedies given the passage of time. In July 2011 the
Competition Commission confirmed its March 2011 provisional decision on “possible material changes of
circumstances.” It found that no material changes of circumstances (that would necessitate a change in the
remedies package) have occurred since the March 2009 decision requiring the BAA to sell Gatwick, Stansted
and one of Glasgow or Edinburgh airports, and that consequently the BAA should proceed to dispose of
Stansted and one of the Scottish airports. The Competition Commission also ordered that the sale of Stansted
take priority and proceed before the sale of one of the Scottish airports. The BAA announced that it would
explore ways of appealing this decision possibly by judicial review. However, it is unclear whether any such
appeal would suspend the implementation of the Competition Commission decision. Following the December
2003 publication of the U.K. government’s White Paper on Airport Capacity in the Southeast of England, the
BAA in 2004 announced plans to spend up to £4 billion on a multi-year project to construct a second runway
and additional terminal facilities at London (Stansted) airport with a target opening date of 2013. Ryanair and
other airlines using London (Stansted) support the principle of a second runway at London (Stansted), but are
opposed to this development because they believe that the financing of what they consider to be an overblown
project will lead to airport costs approximately doubling from current levels. Following the final decision of the
U.K. Competition Commission forcing BAA to sell London (Stansted), it is highly unlikely that BAA’s planned
£4 billion program will proceed, and Ryanair intends to work with the new owners to develop appropriate low-
cost facilities. The recently elected Liberal/Conservative U.K. government has also outlined that it will not
approve the building of any more runways in the southeast of England.
Ryanair announced on July 21, 2009 that, as a result of the U.K. government’s then £10 APD tourist
tax (as well as the then scheduled increase in APD from £10 to £11, which occurred in November 2009) and the
high costs of operating at its London (Stansted) base, it would implement a 40% reduction in capacity at such
base between October 2009 and March 2010. In particular, the Company announced its intention to reduce its
London (Stansted)-based aircraft from the then current 40 to 24 during the aforementioned period, and also