Belfast Telegraph

Thursday 31 July 2014

Coming soon: the air industry versus the government

Coming soon to a court room near you: the airline industry versus the European governments who put them out of business for the best part of a week during Iceland's volcanic eruption.

One expected Michael O'Leary's Ryanair to be consulting its learned friends — he confirmed yesterday that the airline plans to sue several governments over its E50m loss from the volcano — but there are plenty of less hot-headed airline bosses thinking seriously about doing the same if they aren't offered meaningful compensation.

It's not just the loss of revenue the airlines incurred when their planes were grounded — though that was bad enough, given the effects of the recession on the sector — but also their responsibility for covering the costs of passengers hit by the crisis.

The airline industry has felt for some time that European regulations making them liable for the costs of passengers — whether or not they are at fault — are disproportionate.

This episode could not have illustrated the point more clearly, with the likes of Ryanair legally compelled to pick up the bill for passengers stranded for days at a time by an event totally beyond their control.

Leaving aside the rights and wrongs of the handling of the ash crisis — aviation regulators had no choice but to be hyper-cautious — one can see why the airlines are so fed up.

It is difficult to think of any other industry that has to operate as an insurer of last resort for its customers in this way.

Having framed the legislation in this fashion, however, it seems Europe's governments do not share the airlines' view.

And, with taxpayers' cash in such short supply these days, the compensation package the industry wants is unlikely to be forthcoming on a voluntary basis. Europe's courts can expect to be very busy.

House prices on the mainland rose by another 0.2 per cent in April, the Land Registry said yesterday, taking the annual rate of house price inflation to 8.5 per cent.

But what might a hike in capital gains tax in this month's emergency budget do to the property market?

The short answer is that an increase in the rate at which profits on the sale of second homes are taxed from 18 to 40 per cent — one possibility — might prompt many buy-to-let investors to cash in their portfolios before next April, when such a change would presumably take effect.

The Land Registry's data shows that the number of new properties coming on to the market was already up by 80 per cent in March. With demand still constrained by a tough lending environment, another big increase in supply might be enough to send the housing market into reverse.

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