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“Airlines that are not as efficient as us will be losing horrendous amounts of money. There will be more bankruptcies,” warns Ryanair CEO Michael O’Leary |
EUROPE. Ryanair, Europe’s largest low-cost airline, plans to ground 10% of its fleet this winter as record oil prices hit the company’s cost base. The move will affect traffic out of Dublin and London Stansted airports, and will also include reduced frequencies on its busy Rome and Frankfurt-Hahn routes.
Chief Executive Michael O’Leary said yesterday that other cost-cutting measures would include raised fares and a pay freeze for staff. O’Leary warned that even with these measures, the carrier would only break even at best in 2009, if high oil prices persisted.
He said: “If we have to absorb these fuel costs, our profits will be severely dented. But airlines that are not as efficient as us will be losing horrendous amounts of money. There will be more bankruptcies.”
O’Leary was speaking as Ryanair announced a fall in net profit for the year to 31 March, from €436 million a year ago to €391 million. Ancillary revenue, which includes inflight sales and charges for checked-in luggage, speedy boarding and other services, jumped +35% to €488 million. Traffic grew by +20% to 51 million passengers in the year.
Ryanair’s fuel costs represented about 36% of its cost base in the year just ended. It is largely unhedged on fuel going forward.
O’Leary predicted that Ryanair would carry 59 million passengers this year – a rise of +17%. The airline expects fares to rise by +5% in the year. O’Leary said: “The overriding concern for airlines, passengers and investors currently is the irrational price of oil.” He repeated his pledge not to implement fuel charges, a measure that many carriers, including British Airways and Air France-KLM, have already introduced.
Ryanair’s response to the oil crisis is being mirrored by airlines right around the world, and has big implications for travel-related industries such as the travel retail channel. Yesterday, the leaders of the world’s airlines agreed to a resolution calling for governments, airports and labour to take immediate action to help the industry survive the growing financial crisis.
FROM THE PUBLISHER: ‘Counting the cost of oil’ is an ongoing news series in which we present regular updates on the global oil and airline crisis and analyse the impact on the travel retail sector. In our view – and that of several senior travel retail executives – the crisis represents one of the sternest challenges the industry has faced in many years.
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MORE STORIES ON THE OIL CRISIS
Counting the cost of oil: Aviation industry leaders make joint declaration on crisis – 03/06/08
Counting the cost of oil – British Airways to raise surcharges from 3 June – 30/05/08
