Pieces Of Eight: Airports, airlines and taxes

A group of German MPs has been enjoying a late-season break in Mallorca. In between taking in the Peguera Oktoberfest and strolling along the proms with their lederhosen on, the MPs have been having a word or two in President Antich's shell-like. "We don't think much to the rise in your airport charges, Francesc, old boy."

I suspect that they expressed this rather differently, much as I also suspect that I have completely invented their trip to the Bierfest and their leather garments, but express concern as to the charges they most certainly did. Carriers estimate that increased tariffs for security, passengers and landing, planned for next year, could bump up prices by around 12%.

Klaus Brähmig, for it was he, gave the president something of a veiled threat. Put your prices up, and tourists, German ones that is, will decide to go somewhere else. Turkey, Greece and Malta. (Since when has Malta come into the German tourist competitive destination radar? Someone should warn the Maltese and put Alec Guinness on stand-by.)

If Antich was on the ball he might well have responded by pointing out that the Germans are establishing an eco-tax, as from the start of 2011. Eight euros a pop. Doesn't matter where you fly to in Europe. Eight euros it will be. He might also have pointed out that these charges aren't his. "Nothing to do with me, Klaus. You'll need to have a word with Mr. Bean in Madrid." Not such a bad suggestion as the Germans find Mr. Bean corset-burstingly hilarious, even, one imagines, a doppelgänger such as Herr Schumacher, i.e. President Zapatero.

Herr Brähmig had pre-empted the eco-tax riposte. German tourism in Mallorca will not be affected by the pieces of eight, he parroted. In other words, the German tax is ok, but the Spanish charges aren't. Of course, he may well be right about the German air tax. It is universal, so it affects every destination, be it Mallorca or Turkey. An issue for Spain and therefore Mallorca is what happens with charges elsewhere. Athens International Airport, for instance, froze its charges this year.

But do these taxes, be they tax to fly or airport charges, really have any great impact? The evidence from the UK would suggest that they don't, not where Mallorca is concerned at any rate; the air passenger duty is set to rise to twelve pounds next month. British travellers don't, though, have much alternative. German ones do. Lufthansa's Germanwings subsidiary, responding to the eight euro tax, has looked at moving flights from Cologne/Bonn to Maastricht, just over the Dutch border. The Dutch, having scrapped their own tax because it apparently did have an effect, might stand to benefit from a German airline's patronage. Air Berlin's director-general for Spain and Portugal, the former president of the Mallorca Tourism Board Álvaro Middelmann, has described the German tax as "totally absurd".

Nevertheless, unless you happen to live within easy reach of Maastricht, the eight euro tax is one you would be likely to accept. Why pay far more to get to an airport, so that you might just be able to save a euro or so overall? It wouldn't make much sense. The real issue with taxes and charges, where they are transparent to the traveller, lies with how much they are in proportion to the cost of the flight alone. The often excessive criticism of Ryanair is that they apply "hidden" charges. They don't. The additional fees, such as one for tax, seem high because the initial price is so low.

While not everything that emanates from Ryanair is always believable, everyone's favourite airline chief executive, Michael O'Leary, has spoken about changes to the airline's strategy. He has stated that the low-cost model is unsustainable. If Ryanair is paying serious attention to its pricing and product policy, and it is, then whither other low-cost airlines? Palma airport has a high dependence upon low-cost carriers. It is their pricing models which are important, not the taxes or charges. The challenge for Ryanair, which is likely to be one for other airlines, is to grow the business. And to do so requires generating higher yields from passengers. Which means higher prices.

Even if increased taxes and charges become lower as a proportion of the initial price, the overall price of the flight increases significantly. For Ryanair, Air Berlin, Germanwings and any other airline desperate to improve margins, any additional cost element imposed by governments is unwelcome. As they are unwelcome to politicians, when it's someone's else taxes rather than your own. Herr Brähmig does protest too much. He has a German airline industry unhappy at its own government's tax to keep onside, so he takes a broadside at Spanish air charges to try and show he is on the side of the German tourist and the German airline industry. It is a bit rich, and it also obscures the more important issue - that of future air prices.


Any comments to andrew@thealcudiaguide.com please.