Ryanair says Victor Orban’s new airline tax would damage Hungary’s tourism sector

It could see the end of low-cost air travel to Hungary, as many airlines are still struggling to recover their pre-pandemic revenue levels

At the end of May, Hungarian Prime Minister Victor Orban introduced a set of new taxes directed toward banks, insurance companies, energy and trading firms, telecommunications companies and airlines. Under the new regulations for 2022 and 2023, these companies would be obliged to pay their excess profits back to the state.

With that extra funding, the Hungarian government would then set up a ‘utility cut protection fund’ helping to keep bills for consumers low. The money would also go towards some development programmes for the military.

According to a company statement, however, Ryanair called on the Hungarian PM to scrap the tax for airlines, as they described it would hurt Hungary as a tourism destination. The Irish low-cost airline also stated that airlines still have not recovered their revenue to pre-pandemic levels, so the tax would slow down that recovery even further.

On Thursday, the airline decided to pass the tax on customers, even including people who have already booked their flights before the introduction of the tax. According to a Telex report, Ryanair has stated that people would get a full refund if they decide that they want to claim it.

The tax could make low-cost air travel to Hungary a thing of the past

The new plan would see Hungary asking for a tax of 10 to 25 euros per passenger, departing from the country, starting from July. Considering low-cost airlines sometimes offer tickets as low as 15 euros per direction, this tax would make budget trips to the country economically unsustainable.  

The statement from Ryanair calls the tax unjustified, ill-advised and ill-timed. It further reads that comparing airlines, which have struggled over the pandemic to the hugely profitable oil and energy industry would make Hungary unattractive for both airlines and tourists.  

This opinion was seconded by Ryanair’s competitor, Hungarian-based WizzAir, in a statement made last month, as they believe it would take years for the industry to recover from COVID-19 – and the tax would only hamper that recovery.

Covering the utility cut protection fund

Victor Orban was re-elected in April in a landslide victory, which many analysts attribute to a wave of populist measures that were aimed at keeping prices low for consumers amid rising inflation.

The ruling Fidesz party had even resorted to tricks like discrediting the opposition through propaganda directly sent to voters. They did this by co-opting e-mail addresses, which citizens had submitted to receive Covid vaccine information.

Back in February, the Hungarian government also introduced price caps on food and fuel for cars, providing the cheapest prices at the gas station in the EU.

The new tax, however, would allow Hungary to be even more generous with subsidising consumer prices, as the bill should provide authorities with a sum estimated around 200 billion euros.

According to a report by Hungary Today, Victor Orban’s government was committed to protecting jobs, families and retirees in a protracted war situation. However, as prices and interest rates rise certain institutions end up profiting from the war. As the PM put it, those who profit from the war should pay to keep prices low for consumers and ensure Hungary’s defence.

At the same time, Reuters also claimed that the move hit Budapest stocks and rattled investors. One of Central Europe's largest independent lenders, OTP Bank, reportedly said the new tax would divert 78.3 billion forints this year alone, or the rough equivalent of 200 million euros, from its revenue.