Passengers could be taking budget flights between the US and Europe on a Ryanair-backed airline in less than three years, the low-cost carrier’s chief executive claimed yesterday.
Michael O’Leary said plans to launch a no-frills transatlantic service had been bolstered by an industry downturn that could slash the cost of long-haul aircraft as rivals go bust or orders are cancelled.
The carrier would operate from up to nine bases on each side of the Atlantic, with Stansted, Frankfurt-Hahn and Rome-Fiumicino among the candidates for European hubs. Islip airport on Long Island is mooted as a New York base.
O’Leary said the airline could be launched 18 months after acquiring a new fleet next year. “There may be an opportunity to pick up cheap long-haul aircraft next year, in which case we might launch a low-cost, long-haul programme in two-and-a-half years,” O’Leary said.
He added Ryanair would be “distinctly separate” from the new carrier, which will attempt to make a better fist of the low-cost transatlantic market than Zoom, the Canadian-British carrier that fell into administration in August. O’Leary also ruled himself out of running the new business, but said he might join other Ryanair investors such as Prudential and private equity firm TPG in backing the venture.
“We want to bring people on board who have done well out of Ryanair,” he said.
The airline would expect to operate a fleet of new aircraft because it would pick up orders from Boeing and Airbus that had been cancelled by bankrupt or financially struggling carriers, he added.
One banking source said: “Airlines are constantly moving around delivery positions at the moment. O’Leary could get a long-haul airplane within six months.”
O’Leary squeezed significant discounts from Boeing in the last industry downturn, when he placed a significant order to expand his fleet.
However, analysts warned that he would struggle to elbow his way into the order book for the Airbus A380 and the Boeing 787 Dreamliner, the most advanced long-haul jets on the market, because delivery delays have created a significant backlog.
Nonetheless, O’Leary expects the industry downturn to reduce the cost of long-haul aircraft that retail at between $170m (£97.1m) and $280m.
Andrew Lobbenberg, analyst at Royal Bank of Scotland, warned that cheap fares between Europe and the US were available on traditional carriers such as British Airways and Air France-KLM, part-subsidised by the steep ticket prices levied on business customers.
“Long-haul fares are often quite cheap in economy – in part because they are subsidised by people in the front [of the aircraft]. It’s not going to get consumers anything like as excited as low-cost short-haul,” said Lobbenberg.
O’Leary is also expected to offer a business-class cabin with flat beds at a lower cost than BA or Virgin Atlantic. The Ryanair boss added that he expected at least one British airline and two continental carriers to go bust within weeks as any benefit from falling fuel costs will come too late to save the least profitable businesses.
He said 400 staff at Ryanair’s Stansted airport base would have to take one week of unpaid leave over the winter to conserve costs, while senior management would take a pay cut of at least 10% this year. Ryanair expects to break even in this financial year – wiping out last year’s profits of €439m (£341m) – if oil remains at $100 a barrel or less.
BA confirmed yesterday that 135 jobs were under threat in Glasgow. The airline is planning to scrap its cabin crew base in the city and has given staff the option of voluntary redundancy or relocation to Heathrow.
Its chief executive, Willie Walsh, and the Scottish first minister, Alex Salmond, discussed the plan yesterday, which follows the offer of voluntary redundancy terms to 1,400 BA managers last month. Those senior staff, who work in all parts of the business, were set a deadline of today to respond to the redundancy offer.