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Airlines Are Insurer of Last Resort: O'Leary

European regulations providing rules for compensation for denied boarding or cancellation or long delay of flights are pinning paying damages to passengers stranded by an act of God on the airlines, Michael O’Leary, CEO of low-cost airline Ryanair, said Tuesday.

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When thousands of flights were grounded last month and in April because of ash clouds following the eruption of a volcano in Iceland, Ryanair initially said it would provide no compensation for passengers.

“A lot of people understand the volcano wasn't the airlines fault, you shouldn't have to compensate,” O’Leary said. “If you got stuck for three days, tough. Get over it. You just got four extra days holiday.”

Government-owned forms of transportation compensate only ticket prices, but airlines are expected to provide higher amounts of compensation, O’Leary noted.

If Italy fines Ryanair for not recovering passengers stranded by the volcano, as it has announced, O’Leary said his company will appeal it.

"They've now made the airlines the travel insurer of last resort. During the Icelandic volcanoes, all of the travel insuring agencies pay nothing, because it's an act of God. But because some numptie passed a regulation that says 'doesn't matter if it's an act of God, the airlines will pay' we've got to shell out millions in compensation for people taking extra weeks holidays," he said.

The volcanic ash itself was not such a big a problem, he added.

“We took a flight and lo and behold it was covered in a light dusting of volcanic ash. It's not a big deal. You just wipe down the engines and off you go again.”

Further government taxes will have little impact on Ryanair due to the company’s focus on low airfares, O'Leary also said.

-Watch interview with Michael O’Leary, CEO of Ryanair above

But tourist taxes in Northern Europe, Ireland and the UK are contributing to less travel in these areas and more travel in Mediterranean countries, he warned.

"The quantum of growth we're enjoying in places like Spain this year, and Italy and Greece, is quite phenomenal. Much less in the northern European economies, Ireland and the UK are in the toilet. Not helped by the government launching tourist taxes which have to be the stupidest taxes in history for the two Ireland nations. We elect stupid people to government and shouldn't be surprised when they introduce stupid taxes," O'Leary said.

Fares have decreased by 13 percent in the last year, O’Leary said.

And as other airlines have strikes, more passengers switch to Ryanair because of low prices.

To avoid the high costs of oil, O’Leary said Ryanair will buy the most engine-efficient aircrafts as they become available.

The company plans to buy 100 aircrafts by 2012 to increase its passengers to 85 million.

“We have the newest type of aircraft burning the least amount of fuel,” he said.

Ryanair has a proposed a 500 million euro ($610 million) dividend for October, if approved by AGM in September, O’Leary said.

He added that the company is also giving money back to its shareholders.

Currently, O’Leary said passengers are 80 percent of revenues and ancillary, such as checked luggage, are 20 percent.

He said he expects those to remain the same for the next few years.