Hungary will apply an “excess profit special tax” on airline companies while Ryanair and others are losing money. The C.E.O. of Ryanair Michael O’Leary called the minister of economic development a “complete idiot“.
The chief executive of Ryanair Michael O’Leary on June 14 said he thought that Márton Nagy, Hungary’s minister of economic development, was “a complete idiot” as the country imposes a new tax on airlines starting July 1.
The new government of Viktor Orbán, after having declared a state of emergency in the country, announced end of May a series of measures to help improve the state’s finances. It includes a tax on surplus profits during the next two years that will apply to large companies like banks, insurance, energy and pharmaceutical companies, retail chains and airlines.
This tax for “extra profit” is expected to bring 800 billion forints ($2 billion) a year, including 30 billion forints from airlines.
But the chief executive of Ryanair, known for his offensive comments, “cannot understand his argument that an excess-profit special tax should be imposed on the aviation industry when we suffered record losses last year due to Covid,” and are suffering from the invasion of Ukraine.
Ryanair Holdings on May 16, reported a loss of 355 million euros for 2021 ($348 million). The Irish company is among the largest airlines operating in Hungary along with Wizz Air, a low-cost Hungarian airline company, which reported a loss of close to 650 million euros ($676 million) a year. Wizz Air’s chief executive also considered such a tax made no sense and that it may increase its prices.
On the same day of Mr. O’Leary’s interview with hvg.ru, Ryanair on its corporate website denounced an “idiotic” excess profit tax and condemned this “highway robbery by a government“. Mr. O’Leary called on Minister Nagy to reverse the tax “or at least confine it to industries like oil or gas who are making windfall profits, and not airlines who are reporting record losses“.
He also said the company would send Mr. Nagy the booklet Economics for Dummies.
With the new tax starting July 1, Hungary will charge 3,900 forints ($10) for each air traveler departing from Hungary to a European Union member state, Albania, Andorra, Bosnia and Herzegovina, North Macedonia, Iceland, Kosovo, Liechtenstein, Moldova, Monaco, Montenegro, Great Britain, Norway, San Marino, Switzerland, Serbia or Ukraine. Flights leaving for other countries would be charged 9,750 forints ($25), according to Telex. People in transit are not subject to the tax.
The government’s decree imposes the tax on ground handling services in Hungarian airports but contractors can transfer the fee to airline companies, according to Ryanair.
As such, the low-cost company headquartered in Dublin sent a letter to clients who bought tickets after June 4 that they will need to pay an extra fee of 3,900 forints for flights on July 1 and after because of the superprofit tax.
Clients have the right to cancel their tickets and get a full refund before June 16 or the money will be charged directly from the credit card used to buy the tickets. Ryanair also warns that there will be fewer flights to Hungary because of the tax although it doesn’t consider stopping any destination at the moment.
The government yet warned that tax should not be applied to clients. Cabinet Minister Gergely Gulyás said the government would have the legal power to take away profits if airline companies charged consumers extra fees for the tax and would take action if they do it to a large extent.
After Ryanair announced applying the tax to consumers, the minister of economic development Mr. Nagy initiated a consumer protection investigation to see if the airline applied unfair prices.
He also hoped “the airline’s answers would be that fast when Hungarian citizens turn to them for a customer complaint,” referring to how fast the company applied the tax to customers. “We hope that passengers are not treated with such arrogance.” Mr. Nagy also argued he didn’t understand why Ryanair has a double standard by paying a similar tax in Germany, the Netherlands, Sweden and France but has “problems” with the Hungarian one.
But Mr. O’Neill doesn’t worry about the investigation, arguing a national government of the European Union doesn’t decide on airline pricing policies. He also said that “we’re not wasting our time negotiating with a government that has this stupid minister“.