Ryanair (FR, Dublin Int'l) has demanded that the government of Hungary scrap what it called an “unjustified” and “misguided” tax recently announced on airlines, to be imposed on departing passengers as part of efforts to fight inflation. When the carrier argued that it would be forced to pass on the “illogical” new windfall tax to consumers, Budapest reacted by ordering an immediate consumer protection probe into the company.

Viktor Orbán, who won a fourth consecutive term as Hungary’s prime minister in early April, unveiled the new tax on May 25. He declared in a Facebook video at the time that the tax would be levied on “banks, insurers, large retail chains, energy and trading companies, telecommunications companies, and airlines” to counter price rises blamed on the war in neighbouring Ukraine, as well as to fund further defence spending.

The proclamation came a day after he introduced a state of emergency citing the same reasons. Money raised will go to two funds, he explained - one to strengthen the army, the other to enforce price caps on energy and water bills. The “sanctions policy in Brussels” against Russia in relation to the war has led to rising prices, he claimed, which together with high interest rates “are giving banks and large multinationals extra profits.”

The taxes, worth HUF800 billion forints (USD2.1 billion), will apply for 2022 and 2023. For airlines, the new levy involves a tax of EUR10 to EUR25 euros (USD10.50-26.50) per passenger departing Hungary from July.

In a statement on June 8, Ryanair argued that the move “will irreparably damage Hungarian tourism, connectivity, traffic, and jobs.” A new tax on the airline industry is “beyond stupid,” it added, as the carrier itself “has just announced losses, yet the Govt is proposing a tax on 'extra profits', which are nonexistent due to Covid and the Russian invasion of Ukraine.”

The “ill-timed and ill-advised” tax “inexplicably compares the loss-making aviation industry with hugely profitable oil and energy companies [and] has instantly made Hungary uncompetitive and less attractive to airlines and tourists.” Ryanair will consequently “be forced to move growth capacity to those countries that are working to restore traffic.”

Two days later, Hungary’s government said it had launched a consumer protection investigation against Ryanair for pledging to pass the costs on to passengers. The probe will look into whether the carrier has been conducting unfair trade practices, the state-run news agency MTI reported.

Márton Nagy, minister for economic development, told the news agency the government would do all it could to stop the costs of the windfall taxes from being passed on to consumers. He added: “It is especially adverse that Ryanair has started this practice with regard to tickets sold earlier. Investigations will be conducted in each and every case.”

On June 14, Ryanair called on Nagy to explain why airlines are being levied a tax “to 'protect Hungarian families' when airlines are reporting record losses”; why “Hungarian families and visitors being asked to pay higher fares”; and “how does raising taxes on air travel 'help' Hungarian families? This is not an 'excess profits' tax, it is just highway robbery.”

It added: “Ryanair welcomes the proposed consumer protection investigation and calls on Budapest City Council to extend this probe to investigate how the Hungarian Govt is introducing an 'excess profits' tax on a loss-making industry such as airlines. When the loss-making airlines are trying to recover from Covid and Russia’s invasion of Ukraine, the last thing we or passengers need is an 'excess profits' tax. Perhaps Minister Nagy can explain why this idiotic tax is being imposed on the loss-making airline sector.”

Ryanair subsidiary Buzz (Poland) is one of three passenger carriers currently operating a crew base at Budapest, the others being Smartwings (Hungary) and Wizz Air. Wizz and Ryanair dominate traffic at the airport, the ch-aviation capacities module shows. Of the 34 passenger airlines currently operating there, the two LCCs have 30.51% and 30.05% of the capacity, respectively. For Hungary in general (Debrecen and Sarmellek also see scheduled passenger flights), Wizz Air and Ryanair occupy 32.13% and 29.26% of the market.