Airlines profit from charges, says DAA

Aer Lingus and Ryanair have been earning profits of up to 50 per cent on what they present to customers as taxes and charges on some fares, Dublin Airport Authority (DAA) told competition regulators during their inquiry into the proposed merger of the two airlines.

At an inquiry into Ryanair’s bid to buy Aer Lingus, the DAA told the UK’s Competition Commission that it believed the taxes and charges passed on to customers by both airlines on routes out of Dublin airport did not reflect their actual cost.

“Based on charges observed at various dates, it appeared that the airlines were earning margins of between 30 and 50 per cent on what were presented to customers as taxes and charges,” a summary of the authority’s evidence to the commission states.

The summary also says that the DAA noted that, in situations where one or other airline increased these charges, the other would follow suit shortly afterwards. Both airlines pay charges and taxes at airports and pass these on to passengers, detailing them separately when flights are booked.

There is no set charge and the maximum average paid on any customer going through Dublin is said to be €10.50. However, both carriers pay different rates as they have different requirements.

Aer Lingus argued that other charges had to be included in its calculation of the total figure charged to customers, such as those levied by the Irish Aviation Authority, government taxes and destination airport security fees. Ryanair said it would not comment on claims made by the DAA. The two sides have regularly clashed over the issue of airport charges in the past.

Most recently, the airline sharply criticised a DAA announcement that it intended increasing charges by 0.5 per cent for 2013. A spokesman for the DAA said that the authority would not comment.

The EU Commission shot down Ryanair’s bid to buy out Aer Lingus, in which it already holds a 29 per cent stake, on competition concerns.

The two airlines are rivals on a number of routes between Ireland and Britain, including between Dublin and London. The UK’s mergers watchdog was one of a number of bodies that inquired into the bid in recent weeks. In its submission, one of a number of third party presentations made to the UK commission, the DAA said Aer Lingus and Ryanair had 90 per cent of traffic between the Republic and the UK.

It pointed out that the number of routes where the pair had a combined 100 per cent market share had increased to five in 2012 from three in 2007.

The bid was Ryanair’s second attempt at taking over its rival. It afterward described the commission’s decision to block it as “political”.