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Friday, June 21, 2024

Confusion flies over Ryanair’s strategy

Political battles tied to Ryanair’s objections to an airline seat tax in Norway, and whether they will lead to closure of the Rygge airport where Ryanair has its base, may have strayed off course. One union official claims Ryanair is only trying to avoid compliance with Norwegian labour laws at Rygge, and may keep flying from Norway even if the tax is imposed as planned.

Ryanair continues to generate turbulence in the Norwegian market where it's been trying to expand. PHOTO: Wikipedia Commons
It’s still unclear whether Ryanair will really be flying out of Norway for good, or decide to pay the new airline seat tax and keep flying from other Norwegian airports after simply closing its base at Rygge. Then it could avoid having to pay the employer taxes and fees that its Norwegian-based rivals do, to cover the costs of social welfare benefits for employees. The airline may even maintain some routes to Rygge from abroad, and back again. PHOTO: Wikipedia Commons

Debate continues to soar over the NOK 88 tax per seat on flights taking off within Norway, and NOK 80 for flights abroad, set to take effect from June 1. Ryanair has claimed it won’t pay the tax, or charge it to customers, but then Ryanair would need to stop flying from Norway altogether if it’s imposed. Instead, the airline has secured new slots at Oslo’s main airport at Gardermoen and is also still flying from the Torp airport at Sandefjord.

As newspaper Aftenposten reported on Thursday, it’s only Ryanair’s base at Rygge that it’s threatened to close, meaning it would no longer have aircraft based at the airport that’s about an hour’s drive south of Oslo. Ryanair currently has aircraft placed there that fly from Rygge back and forth to European destinations, with a constant traffic program.

Ryanair’s base at Rygge can become costly
A union official who’s been involved with a former Ryanair flight attendant’s lawsuit against the airline, filed in Norway over her allegedly unlawful dismissal, stressed to state broadcaster NRK that it’s the base itself that’s become a potential liability for the low-fare airline. The flight attendant’s case is now before the Supreme Court, after Ryanair lost efforts to have her complaint heard in its home country of Ireland, and if she wins, it can mean that Ryanair would have to comply with all Norwegian labour laws for its employees based at Rygge. Ryanair would need to pay employer taxes to cover all the social welfare benefits to which workers are entitled in Norway, and that can become expensive for a cut-rate carrier like Ryanair. It would lose the competitive advantage it currently has over other Norway-based rivals like Norwegian Air and SAS, which have much higher costs.

By closing its base at Rygge, it can eliminate those costs while still being able to fly in and out of the airport using aircraft based abroad. Those routes, Aftenposten notes, would only be halted if the Rygge airport itself shuts down because of too much loss of business. The small airport has become dependent on Ryanair as its only major airline customer. If Ryanair merely shuts its base but still wants to run routes from Rygge, the airport may stay open.

Ryanair’s negotiation with OSL Gardermoen indicate it may in fact be willing to swallow the airline tax, which the government seems determined to maintain despite the opposition that arose in Parliament because of the threatened airport closure and the loss of jobs that would create. Low-fare airlines like Ryanair have been drifting towards the major airports in Europe instead of the outlying ones, to take advantage of the lucrative markets they serve. OSL Gardermoen can offer a highly attractive passenger market to Ryanair, which it seems keen to exploit.

Rivals demand equal treatment
Other carriers serving OSL Gardermoen, though, are already insisting that Ryanair must pay the same landing fees and taxes that they do at Norway’s gateway airport. Ryanair’s boss has early dubbed those fees as “absurdly high” and they are high compared to other countries, but that’s because they’re used to subsidize the costs the state has of operating airports in remote areas of Norway that need airline service but have tiny populations. All of OSL Gardermoen’s substantial profits are sent out to the districts to keep airports there aloft.

Ryanair still hasn’t revealed its plans for Norway, saying only that it will announce its intentions “in the coming days.” Speculation is now high that Ryanair wants to fly from OSL Gardermoen, will continue running flights from Torp and maybe even Rygge, if it gives the airport enough business to keep it from closing. With Ryanair gone or running greatly reduced routes, Norwegian Air may return to Rygge as well. It pulled out of Rygge in 2010, when Ryanair set up its base and became the airport’s dominant carrier, because Norwegian couldn’t offer the “ultra-low fares” that Ryanair can by avoiding Norway’s high employer costs. Berglund



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