Michael O’Leary said BA’s reduction in flights would allow his company to overtake BA as Britain’s biggest carrier.
Ryanair could topple British Airways as the UK’s dominant airline within months, the low-cost carrier predicted yesterday.
Although it carried 1.4 million passengers in the British market during September, compared with BA’s 1.6 million, the flag carrier is reducing the number of flights that it offers this winter while Ryanair is forecasting that it will continue to grow.
Michael O’Leary, chief executive of Ryanair, said that this would allow his company to overtake BA as Britain’s biggest carrier. “It is hard to know when it will happen because it is hard to keep up with how fast BA’s passenger numbers are declining,” Mr O’Leary said. “We will overtake them at some point — and I am not talking about months [when] they have a strike.”
Ryanair increased its total passenger numbers by 15 per cent to 36.4 million in the six months to the end of September. It already carries more people across Europe than any other airline but now it is challenging traditional flag carriers in their home markets.
However, Mr O’Leary said that the days of rapid expansion at Ryanair could come to a halt unless the airline struck a deal with Boeing for up to 200 new aircraft. It has 100 on order for delivery by 2012 and, if it is unable to secure the new aircraft, Ryanair will adjust its future strategy and return cash to shareholders, instead.
“There is a relatively small gap between us in terms of pricing,” Mr O’Leary said. “The problem is that we cannot get a decision out of Boeing. If we cannot get the deal, we will reach 2012 and change strategy to maximise profits and cash and distribute it to shareholders.”
Mr O’Leary said that such a strategy could lead to higher average fares because the airline would no longer be working so hard to fill an expanding number of seats. Ryanair’s growth rate has forced it to keep fares low to ensure that demand keeps pace with supply. In the past six months, the budget carrier’s average fare fell 17 per cent to €39 (£35), including luggage charges. Mr O’Leary predicted that weak demand during the winter would lead to further fare reductions of up to 20 per cent, which would result in the airline making a loss in the next six months.
During the first half of the year, Ryanair increased net profits by 80 per cent to €387 million, largely because of a 42 per cent drop in its fuel bill. The carrier predicted that full-year profits would be at the lower end of a range of €200 million to €300 million.
Mr O’Leary’s decision to raise the possibility of a change in strategy surprised analysts, because Ryanair has relentlessly pursued market share over dividends since it began its growth spurt 15 years ago. There was speculation that Mr O’Leary’s comments were aimed at forcing Boeing to conclude a deal that could be worth $6 billion (£3.6 billion) at list prices.
Alternatively, Ryanair’s shareholders may have come to the same conclusion as Sir Stelios Haji-Ioannou, easyJet’s founder, that consistent double-digit growth rates are unsustainable. Sir Stelios has been arguing for some time that easyJet needed to trim its growth plans and return more money to shareholders. He has struck a deal with the airline’s management to limit growth to 7.5 per cent a year.
Sir Stelios said yesterday: “I have been telling everyone that would listen for the past year that this do-or-die mission O’Leary is on to buy more and more aircraft will end up in tears for his shareholders.”
‘Hatchet job’ backfires
The BBC’s Panorama investigation into Ryanair resulted in the budget airline selling an additional 800,000 seats, it was claimed yesterday.
Panorama aired its exposé, Why Hate Ryanair, on October 12.
Michael O’Leary told The Times yesterday that the publicity generated by the programme led to the airline selling 800,000 more tickets than normal in only four days.
Ryanair would normally expect to sell about 350,000 to 400,000 seats a week in the UK market. “We got 30 minutes straight after EastEnders,” Mr O’Leary said. “You just can’t buy that sort of publicity.”
Ryanair used the publicity surrounding the programme to launch a sales promotion.
The Panorama programme aimed to reveal Ryanair’s business tactics and particularly its concentration on driving down costs. Mr O’Leary called the BBC show a “hatchet job”.