Ryanair Insurance Levy

Interesting article from The Guardian…

Ryanair’s ‘sky high’ insurance levy

Europe’s largest no-frills airline, Ryanair, boasts proudly of offering the lowest fares in the sky. But the Irish carrier is quietly boosting the price of its tickets through an “aviation insurance levy” on every passenger which raises far more than it spends on insuring its aircraft.

Ryanair’s fares start at 79p. But when customers reach the point of paying, the airline adds a glut of taxes and levies including a fee to cover insurance of £3.15 a traveller. The airline has carried 34m passengers over the past year – which means the surcharge raises £108m on an annualised basis.

Inquiries by the Guardian have established that Ryanair pays only a fraction of this in insurance. The rest is free to be used to boost the airline’s earnings – and it appears to make up a significant slice of the carrier’s profits, reported The Guardian.

Consumer groups and rival airlines have called on Ryanair to explain where the money from its insurance surcharge goes and why such a large amount is added to the advertised ticket price.

Simon Evans, chief executive of the Air Transport Users Council, said add-on charges imposed by low-cost airlines were becoming an issue of increasing concern. “For a long time we’ve had a bee in our bonnet about these add-on items,” he said. “Why are they itemising these things if it’s not to make headline fares cheaper? They’re all just costs of doing business and they should be included in the fare.”

Scrutiny

He added: “We’ve no idea how much they raise and where the money goes to. I would always be interested to hear Ryanair’s take on this – but it’s a question which needs to be asked to other airlines as well.”

Customers seeking a 79p fare on Ryanair end up paying far more. A traveller paying by credit card and needing to check in a single bag will end up with a bill of £20.22 – after tax, an airport charge, a baggage charge, a payment fee and a 33p “wheelchair levy” to cover the cost of carrying disabled passengers.

But it is the insurance surcharge, amounting to more than 10% of Ryanair’s average fare, which is coming under the greatest scrutiny. In common with other airlines, Ryanair introduced it in the wake of the terrorist attacks of September 11 2001 to cover a spike in the cost of insuring planes.

Initially, the airline set a £1.85 charge but has since raised it by 70% – over a period in which experts say the cost of cover has fallen to relatively normal rates. Andrea Pound, a spokeswoman for GE Insurance Solutions, said that insurance varied according to the age of aircraft, seat configurations, routes and number of departures. But added: “Premiums have come down steadily since the shock after September 11.”

British Airways, Virgin Atlantic, BMI and many others still have insurance surcharges – but at much lower levels.

1L.