AIR WARS: Clash of the cut-price flight titans
‘You’re running out of cash,’ says Ryanair’s O’Leary. ‘Don’t be daft,’ Norwegian’s Kjos hits back
RYANAIR chief executive Michael O’Leary has clashed with rival Norwegian Air after the bombastic airline boss made unsubstantiated claims that the Scandinavian carrier may be financially vulnerable.
Norwegian’s chief executive Bjorn Kjos is understood to have been shocked after O’Leary said the Scandinavian company was ‘scrabbling around daily’ for cash and may not last another year.
Airline industry sources said O’Leary’s remarks were motivated by sour grapes.
Kjos is reluctant to be drawn into an undignified spat with O’Leary, but dismissed his remarks as ‘nonsense’.
‘ There’s nothing in these allegations,’ said Kjos. ‘We are very happy with the financial situation we have. This is Michael O’Leary’s style. He likes to project headlines.’
Ryanair has been mired in a series of public relations scandals after cancelling flights and ruining the travel plans of 715,000 passengers.
Sources said O’Leary was ‘scaremongering’ and the outburst was triggered by his fury over the defection of scores of Ryanair pilots to his Scandinavian rival.
Norwegian, which owns a £300 million stake in a bank, has been expanding rapidly and has been busily opening new routes including one from Gatwick to Sin- gapore last week. Plans for the near future involve Argentina, Chicago and Austin in Texas.
Kjos’s firm has recruited 400 pilots this year – including 140 from Ryanair. Airline sources insist Norwegian has not been poaching and said ‘market forces’ prompted the pilots to leave O’Leary’s firm.
O’Leary’s low-cost carrier, now Europe’s biggest airline, was last week locked in a showdown with the Civil Aviation Authority over the cancelled flights farce which Ryanair has blamed on botched holiday rotas. Analysts say the fiasco has wiped as much as £50 million off Ryanair’s profits.
The CAA had threatened legal action over the cancellation of 20,000 Ryanair flights. CAA chief executive Andrew Haines said last week he was ‘furious’ that Ryanair had not complied with the law. He said the company should have offered passengers more money.
Ryanair said on Friday it had agreed to the CAA’s demands to clarify the compensation packages being offered to passengers.
The airline also took a swipe at BA and complained that the CAA appeared to have taken no action when that airline suffered a computer meltdown in May.
Market analysts said Ryanair’s expansion plans have been too ambitious and its stretched pilot rota has been put under more strain by the departure of the pilots.
Ryan air has launched roadshows from Brazil to Dubai in a recruitment drive, but sources said O’Leary’s ridiculing of his own pilots was not helping.
The Irishman said ten days ago: ‘I would challenge any pilot to explain how this is a difficult job or how it is they are overworked.’
Pilots still working for O’Leary are understood to be taking advice on the possibility of industrial action to force Ryanair to offer them better contracts. Daniel Röska, a broker at Sanford C Bernstein and also a former executive at Lufthansa, said: ‘The likelihood is that they just don’t have enough pilots to fly their planes.
‘Given their contract frameworks and working conditions, it’s a tough sell. Meanwhile, the US carriers are ramping up and are paying on a vastly different level.’
THE Ryanair flight foul-up has shone a spotlight on the weaknesses of many travel insurance policies – especially no-frills deals selected simply on price. Thousands of holidaymakers caught up in the cancellation fiasco are busy claiming compensation for lost flights from the airline. Now extended to March, a further 400,000 will be affected.
Many of these might only be entitled to flight rerouting or refunds and vouchers worth up to £ 80 towards future bookings – plus outof-pocket expenses such as meals. Extra compensation is available under European Union rules – but only for passengers who have had less than 14 days warning.
The budget carrier is likely to resist meeting ‘consequential’ losses, such as having to cancel car hire or hotel bookings. But travellers armed with receipts should try to recoup the money from the airline under the Consumer Rights Act.
Those relying on travel insurance to step in instead may be seriously disappointed. Most standard policies specifically exclude this kind of financial disaster. To rub salt in the wound, Ryanair’s own travel cover sold alongside flights will not pay out for such claims.
Good insurance policies will cover spin-off expenses – so check the terms and conditions before departure. Fiona Macrae, of website Travel Insurance Explained, says: ‘Look for cover that includes “cancellation for any cause beyond your reasonable control”. This will cost a couple of pounds extra on the premium but will be money well spent if you have to claim.’
With the half-term holidays later this month, travellers should check their policies are fit for purpose.
The cancellation catch is just one of the pitfalls facing unwary policyholders. Riddled with exclusions and caveats, low-cost plans in particular can lead to financial disappointment. Here are the six top travel traps – and how to avoid them.
MISSED DEPARTURE
MOST contracts cover missed departure – paying out costs incurred in getting to your eventual destination. But the maximum payout varies from £250 to £1,000 and holidaymakers need proof.
Many policies pay out for flights missed because of a problem with public transport or car breakdown on the way to the airport. But some will not accept being caught in a traffic jam or will only shell out in the event of an accident. The long queues at security are unlikely to be an acceptable excuse.
HIGH EXCESSES ON POLICIES
TRAVELLERS are often presented with low premiums by agreeing to a high excess – the amount a policyholder must contribute towards the cost of any claim. But insurers with cheap and cheerful plans often make a separate charge for every element of a claim.
Brian Brown, of insurance analyst Defaqto, says: ‘If you lost a handbag full of cash you will need to claim for the bag and the money, both of which carry their own excess.’
A quick search of an insurance comparison website throws up a policy for just £ 6 for a week in Europe – but the excess is £250. Choose the no-excess version and the premium rises to just over £11.
POOR COVER FOR POSSESSIONS
DO not rely on cheap travel cover to meet the cost of lost or damaged valuables, warns Defaqto’s Brown. Brown says: ‘On standard policies the limits are usually low – about £200 or £300 for single items. Worse still, most travel insurers apply deductions for wear and tear – rarely replacing new for old.’
Fiona Macrae says: ‘ For sunglasses the deduction is usually 80 per cent so with a £150 pair you might get little or nothing when taking into account the excess.’
Electrical gadgets, such as phones, may not even be covered.
Brown says: ‘It is better to arrange cover on your home contents policy. For an extra premium of say £40 a year, valuable gadgets can be covered under “all risks away from home”. My son had a £600 phone in his shorts when he dived in to the pool on holiday and it was ruined. But the insurer paid the claim in full with no excess to pay.’
PASSPORT REPLACEMENT
LOSING travel documents is an organisation hassle – and a serious expense. Not all travel policies offer cover and those that do may limit payouts, sometimes £100 or less. Macrae says: ‘Most standard policies will only cover the cost of getting to the embassy for the replacement documents and not related costs, including a new pass-
port once in the UK.’ A claim may also be rejected if a stolen passport had been left unattended – unless in a safe.
PRE-EXISTING HEALTH ISSUES
MANY insurers demand policyholders are treated in state hospitals if they fall ill abroad – to keep costs down.
But in some countries referral fees passed to hotels mean holidaymakers are automatically diverted to private clinics.
Always inform the insurer before any treatment begins otherwise it may refuse to cover the bills. It may arrange for you to be moved to a state medical facility. Check in advance if private hospitals are included in your medical cover.
Always tell an insurer if you have any pre-existing health conditions such as high blood pressure or asthma. The best policies will still cover you, sometimes for no extra premium if the condition is well managed. Low-cost plans are likely to exclude them – as well as any medical problems that arise while on holiday as a result of an initial health issue.
CRITICAL CONDITIONS
HOLIDAYMAKERS with critical illnesses such as cancer or heart disease can struggle to find affordable insurance ( or even cover at all). Richard Smith’s firm Travel Insurance Facilities Group specialises in finding cover for those who have been treated for cancer and other serious conditions. The firm’s screening system – Protectif – is behind brands such as Boots Travel Insurance and Insurance With which offer cover for cancer sufferers.
He says its form of online questioning more accurately assesses a traveller’s condition based on their current medication and treatment history.
The Financial Conduct Authority aims to get the industry to widen choice for cancer sufferers by the end of this year.
The British Insurance Brokers’ Association has asked the regulator to impose ‘signposting’, where websites and insurers that cannot offer suitable cover must refer travellers to insurance brokers or specialists who can help.