‘Ryanair won’t be only victim’
RYANAIR boss Michael O’Leary predicted a “grim winter” for the airline industry and expects more rivals to go bust after his profits took a hit from strikes and rising fuel prices.
The low-cost carrier is braced for fares to fall about 2 per cent in the second half after they declined 3 per cent to €46 (£40.60) in the first six months and may have to close more bases or cut flights.
But O’Leary insisted Ryanair is set to land more growth opportunities as weaker competitors feel the heat of higher fuel costs.
SkyWork, Cobalt and Primera collapsed recently and UK regional airline Flybe issued a profit warning last week.
Ryanair’s half-year profit fell 7 per cent to €1.2billion after what O’Leary called “the worst summer of air traffic control disruptions on record”.
Passenger numbers were up 6 per cent to 76.6 million and revenue from extras like priority boarding and choosing seats grew by 27 per cent to €1.3billion.
But it was hit by cabin crew and pilot strikes, resulting in compensation costs and fewer bookings into the third quarter including for the October school halfterm and Christmas.
Ryanair hopes to reach deals with its major unions by the end of this year, with progress leaving Germany and Belgium as the only two big markets where it has not secured recognition agreements.
O’Leary said: “Given the adverse environment for airlines and the number of job losses being reported in recent weeks both by pilots and cabin crew, there is a much more sensible, commonsense approach being taken by unions.
“Margins are under pressure and more of the weaker, unhedged European airlines will fold this winter.
“At the same time, many larger airlines are closing bases and cutting routes to minimise winter losses.
“We are entering a grim winter in terms of declining air fares. We expect more failures and over the medium term, this consolidation will create opportunities for our lowest fare/lowest cost model.”
Ryanair is set for 6 per cent growth in passenger numbers this year to 138 million, but its fuel bill will be about €460million higher.
Markets.com’s Neil Wilson said: “The real problem is the strikes – they add in another element in terms of not only higher costs from disruptions, but also the effect on customer confidence, as evidenced by weak forward bookings.
“Progress has been made with unions but there is still a lot of work to do.”