Ryanair chief pi**ed off!
Budget airlines doomed, says Ryanair chief
Andrew Clark, transport correspondent
Wednesday June 2, 2004
The Guardian
Europe's largest low-cost airline, Ryanair, yesterday revealed its first loss for 15 years and enraged its rivals by singling several of them out as potential victims of a "bloodbath" in the budget travel industry.
In the clearest sign yet that the phenomenal growth in cheap air travel is reaching a limit, Ryanair disclosed that it had lost €3.5m (£2.3m) in the first three months of the year as it slashed its winter fares to withstand fiercer than ever competition.
The airline's chief executive, Michael O'Leary, put a brave face on the deficit by comparing it favourably to the record of Ireland's rugby team: "We're Irish - we're used to losses. England come over and kick the **** out of us nine years out of 10."
For the full 12 months to March, Ryanair's profits fell by 5% to €239m - the first decline since the Irish regional airline reinvented itself as an international budget carrier in 1990.
Mr O'Leary forecast that business would remain tough for budget airlines and he predicted several of his rivals could go to the wall. He claimed that casualties could include BMI's low-cost offshoot, BmiBaby, and the Exeter-based airline FlyBE, both of which furiously denied they faced anyfinancial difficulty.
"We believe some of these loss-makers will go bust - some over this winter, some over the next two years," said Mr O'Leary. Under questioning, he added: "It may be BmiBaby or FlyBE in the UK - they're not all going to survive. They can't all sustain this level of losses for too long."
He alleged that continental victims could include two German budget airlines - Germanwings and Hapag Lloyd Express.
Mr O'Leary's remarks came amid increasing concern among consumer watchdogs about low-cost airlines going bust. Unlike package holiday operators, budget airlines have no bonding scheme to protect customers. Passengers with forward bookings can be left out of pocket if an airline fails.
Two British budget airlines, Birmingham-based Duo and Leeds-based Planet Air, failed this year. Last week, SkyNet became the third Irish carrier to cease trading since January, grounding its fleet at Shannon airport.
FlyBE insisted it was not loss-making and had seen its passenger numbers rise 160% last year. In a statement, it said: "We are a low-cost airline focused on regional delivery with a good balance of domestic and international routes. Unlike Mr O'Leary we do not face a scrap in the major price war which is affecting the London market."
A spokeswoman for BmiBaby said the airline was hoping to move into the black this year: "Far from going under, we're expanding at a great rate of knots."
Hapag Lloyd Express, which flies from Manchester and Newcastle to several German cities, said it believed the number of low-cost airlines in Europe would fall from more than 50 to fewer than 25. But a spokesman added: "Definitely Hapag Lloyd will be one of the survivors."
Andreas Bierwierth, the deputy managing director of Germanwings, said Mr O'Leary was bitter because of Ryanair's poor performance on flights to Frankfurt: "We've been laughing this morning about his statements. I think they are his hopes rather than his real thoughts."
After a decade of phenomenal growth, many low-cost airlines have admitted they have found the going tough since the beginning of the year.
Analysts say carriers are struggling to find geographical territory which is yet to be snapped up. Traditional airlines such as British Airways and Lufthansa have hit back, lowering many of their fares to compete more aggressively. The high price of oil has compounded the financial squeeze.
Ryanair carried 23m passengers last year but cut its average ticket price by 14% to €40 as it struggled to fill up its aircraft. The airline has scaled back its expansion plans - after increasing seat capacity by 55% last year, it will grow by a relatively modest 16% this year.
"We don't walk on water," said Mr O'Leary. "The times you test the mettle of a company is when it's losing money."