Ryanair does U-turn, will pay stranded customers’ hotel, food during volcanic ash crisis

Ryanair U-turn, will pay stranded customers’ bills

DUBLIN — Penny-pinching airline Ryanair did a surprise U-turn Thursday and agreed to pay the hotel and food bills of tens of thousands of customers left stranded during Europe’s volcano-ash crisis.

Chief executive Michael O’Leary had initially vowed Wednesday to limit customers’ payments to the original cost of their air fare — which in Ryanair’s case can be very low. He called the EU laws “absurd” and declared his desire to “expose this nonsense” in a landmark legal challenge.

But the European Union, which enforces consumer laws that hold airlines responsible for stranded passengers’ “reasonable costs,” warned Ryanair it could face fines ranging from €5,000 to €150,000 ($6,750 to $202,500) per complaint.

O’Leary’s fighting talk quickly gave way to contrition.

“Michael realizes that he got this wrong,” Ryanair spokesman Stephen McNamara said Thursday.

The reversal of policy — unexpected from a cash-rich airline renowned for fighting EU judgments in courts across Europe — means Ryanair will pay out claims to a minority of the airline’s approximately 1 million customers who suffered canceled flights over the past week.

Ryanair officials declined to offer any estimate of their potential liabilities. They said the airline will reimburse receipted expenses only to customers who did not request a ticket refund or make alternative travel plans. So only those customers who stayed put and waited for a replacement Ryanair service would get their hotel and meal costs repaid.

That would comply with European consumer law and is the policy broadly being observed by other European airlines.

O’Leary appealed Thursday to the European Commission and the European Parliament to reform their laws on passengers’ reimbursement rights, saying they discriminate against airlines.

Payouts for stranded passengers of ferry, rail and bus services are capped at the original ticket cost “yet the airlines are required by regulation to meet potentially unlimited expenses,” O’Leary said.

Ryanair was particularly assertive among European airlines in canceling services well in advance during the Europe-wide uncertainty caused by drifting clouds of volcanic ash. Ryanair shut down throughout northern Europe April 15 and relaunched most flights Thursday, a day later than many airlines. This means Ryanair’s qualifying stranded customers may receive reimbursements for hotels and food for a full week — easily a €1,000 bill for a €100 ticket.

Ryanair previously estimated it was losing €6 million ($8.1 million) per day, or €42 million ($56.7 million) total, because of the week’s lost business. The airline has continued to expand and build market share throughout Europe’s recession and retains cash reserves exceeding €2 billion.

Any reform in EU law capping an airline’s compensation obligations at the original air fare would suit Ryanair better than most airlines.

Ryanair has led the aviation industry in reshaping its charges regime so that its up-front air fares are often negligible. But customers end up paying much more with charges for on-line check-in, use of debit or credit cards and checked luggage, as well as add-on taxes and airport fees.