More airline casualties predicted this winter

Sky-high fuel costs will drive more low cost airlines to the wall this winter, Ryanair boss Michael O’Leary has warned.

Revealing an 18% year-on-year rise in half-year profits after tax to euros 237 million, the CEO of the Irish no-frills carrier said he was “cautious” about the outlook for the remainder of the financial year. 

Ryanair saw fuel costs more than double to euros 236.9 million in the half year to the end of September. This led to the after tax margin dropping by three points to 25%.

O’Leary said: “This winter we expect that there will be continued intense competition and there will be fewer low fare carriers in the market as high fuel costs force more carriers out of the industry.”

Ryanair saw passenger carryings in the six months rise by 29% from 14 million to 18 million, with a 3% increase in yields to produce total revenues up 33% to euros 946.2 million.

O’Leary predicted a partial erosion in the price differentials between Ryanair and traditional flag carriers as those airlines which have imposed fuel surcharges “are forced to lower their underlying fares to compete with Ryanair’s lower prices”.

He attacked failed plans for a £1 levy on tickets to build up a passenger protection fund against airline and operator failure.

“This £1 tax was proposed by the CAA to cover their own failure to ensure that scheduled airlines had adequate financial resources to fly to and from the UK,” said O’Leary.

He also repeated Ryanair’s opposition to £4 billion development plans by airports operator BAA at Stansted, claiming this was a “farce”.

“The objective of this inflated proposal is to ensure that the BAA airport monopoly can claim a higher return on this £4bn of capital expenditure rather than the £400m to £600m which more accurately reflects the costs of the facilities that the users airlines actually want them to build,” said O’Leary.

It was also “beyond belief” that Dublin airport had been allowed to raise airport charges by 23% from January to fund a proposed second terminal five years before it is due to be built.

O’Leary said: “We now have the bizarre situation that an over specified future airport development is being funded by increasing charges now even though not a sod has been turned on the facility, and there is no plan for it to be turned for quite some time.”

*Look out for ‘Pies in the Sky – the future of aviation’ – the next TravelMole Travel Industry Question Time debate to be held in London on November 29. For further details, go to: http://www.travelmole.com/
travel_industry_question_time/index.php?id=21 or phone: 020 7559 6613 

Report by Phil Davies