Thursday, March 30, 2023

O’Leary ready to pounce as Ryanair rivals crumble

Must read


Airlines are facing their worst crisis in a generation and Michael O’Leary is not in the mood to waste it. As rivals have collapsed and pulled out, Ryanair’s chief executive is looking for opportunities to increase the Irish airline’s dominance over European airspace.

“In my 30 years in the industry, I have never seen such a cleanup,” O’Leary told the Financial Times in an interview. “The real seismic change for Covid will be the growth opportunities across Europe. They are much more important than after the financial crisis or 9/11. ”

Airlines’ capacity was reduced during the pandemic, creating a window for survivors to fill in the gaps once people start flying again. Thomas Cook and Flybe collapsed as Norwegian – until recently a large operator in the European market – entered administration.

Mr O’Leary predicted that 100m of competitor’s seats would be withdrawn over the next 18 months, a reduction of about 15 percent from normal passenger traffic.

“Someone has to step up and take that capacity,” he said, adding that he was in talks with airports in Italy and Spain, which were Norwegian customers, to fill those slots with planes. Ryanair.

Mr O’Leary has cultivated a reputation for extravagant claims as he has overseen more than two decades of near-continuous growth at Ryanair, based on cutting costs and maximizing efficiency to undermine its competitors and take out their passengers.

But low-cost carriers are generally expected to lead the flight recovery, as the short-haul and leisure markets they serve will rebound faster than intercontinental and business travel.

Traditional national carriers, such as British Airways, Air France and Lufthansa, rely on the use of their short-haul networks to get passengers to their hubs and on long-haul flights.

“The shape of the recovery in demand favors airlines exposed to short-haul leisure traffic,” said Daniel Roeska, aeronautical analyst at Bernstein.

Or, as Mr O’Leary put it: “Anyone who has been trapped and gone on vacation to Bognor Regis will want to go to Portugal, Italy and Greece.”

As you might expect, an executive who has always used industry downturns to reduce own costs conducts a good business. “The question is which airports are the most commercial to quickly regain their traffic in the summer of 2021,” he said.

London Stansted was “all over us” when British rival easyJet announced it would close its base there, he added. Ryanair has grabbed more than 300 weekly slots from easyJet at the airport for next summer.

Yet the initial impact of the pandemic on Ryanair was deadly. He expects carry only 38 million passengers this year, a fifth of the number in 2019, and suffered a net loss of 197 million euros for the six months ending in September. Losses in the second half of its fiscal year are expected to be larger, especially after another wave of flight cancellations this week, as countries closed their borders with the UK over fears of a new strain of the virus.

Line graph of share price change this year (%) showing investors betting on low cost carriers leading the recovery

The latest uncertainty has been a blow to an industry hoping that an increase in Christmas travel could deliver much-needed cash during the lean winter months.

Despite this, Andrew Lobbenberg, head of airline research at HSBC, agreed that there was an opportunity for Ryanair to grow as domestic carriers lose long-haul flights and weaker rivals disappear.

The Irish carrier has also signaled its ambition by confirming a discounted order for Boeing’s troubled 737 Max plane, which will further reduce costs when it begins receiving deliveries early next year.

But Mr. Lobbenberg warned that any expansion “was not going to be immediate. Everything is progressive and it is more and more difficult to anticipate the rhythm ”.

While easyJet is seen to have taken a more conservative approach to the crisis, Hungarian low-cost carrier Wizz Air has pledged to tackle Ryanair as it expands out of its central European region. Is to become a regional player.

Boston Consulting Group partner Dirk-Maarten Molenaar said legacy carriers were also becoming more flexible, and the “last thing” companies like BA wanted to do was drastically cut back on the short-haul networks they needed to power. their hubs. .

Despite recent pressures, Ryanair’s share price is higher than a year ago – and has risen by around a quarter since early November – as investors have been encouraged by the fact that the rollout of Covid vaccines would fuel a recovery.

Mr O’Leary said there had been a “notable but single digit” increase in bookings over the past month, but from a “very, very low base”.

He admitted that his plans depended on the rapid deployment of vaccines by governments he savages for incompetence and inefficiency. “They are going to mess around but eventually they will spend so much money on the vaccine that they will get there,” he said of the UK government.

Ryanair has a “working hypothesis” that it will fly between 90 and 130 million passengers in the year until March 2022, a significant gap depending on how quickly travel demand returns. It’s well below nearly 150 million passengers in 2019, a number the CEO didn’t see return until at least 2023.

“We’ve always planned for a reasonably quick recovery and consistently disappointed, what has changed is that the vaccines are coming,” said O’Leary. “The problem for our industry is, is the recovery in May or August? We just don’t know.


- Advertisement -spot_img

More articles


Please enter your comment!
Please enter your name here

- Advertisement -spot_img

Latest article