Ryanair Set to Double Parked Fleet this Winter

High fuel costs mean the Irish budget carrier could ground up to 80 aircraft this winter but boss, Michael O’Leary, says its not too late for European airports to approach them with a deal they can’t refuse, writes Lucy Siebert.

Ryanair has revealed that it could ground a maximum of 80 aircraft this winter – double the number of last winter – and remains concerned at the “impact of the recession, austerity measures, and falling customer confidence on fares”. Its Chief Executive Officer, Michael O’Leary, believes fuel costs and the weak economic outlook in Europe will mean more airline failures and will accelerate airline consolidation activity this year.

O’Leary was speaking during a press briefing in London this week, on the carrier’s full year financial results where he said oil prices could see Ryanair’s full-year fuel bill increase by about €350 million, so parking up to 80 aircraft would be more profitable than operating them at low winter yields.

This move would be reflected in its growth forecast of 4 per cent for 2012 – up to 75 million passengers from 72 million in the past year but with dramatically different levels of growth through the year. The airline believes it will achieve strong growth of up to 10 per cent in the first half of the year but monthly traffic in the second half will fall by about 4 per cent.

O’Leary said there could be opportunities for some of these aircraft to come into service over the winter if there is a shift downwards in fuel costs and if European airports could offer the LCC competitive incentives.

The impact of fuel costs means operating cost per passenger is forecast to rise by 13 per cent and average fares be adjusted upwards by 12 per cent. “These higher fares will only help us to finance higher fuel and rising sector length related costs, and accordingly, we expect profit after tax for FY12 to be similar to the FY11 result of €400 million.”

O’Leary believes there will be more airlines disappearing from the European marketplace this year and said British Airways (BA) appears poised to snap up TAP and Lufthansa may make a move on SAS and LOT in 2011. “If oil remains above $100 through the summer then there will be more airline bankruptcies and certainly more consolidation like BA/Iberia,” he said.

O’Leary said he would be “amazed” if the LCC did not have 50 bases by this time next year. It currently has 44, having opened eight new bases in the past year (Barcelona El Prat, Gran Canaria, Kaunas, Lanzarote, Malta, Seville, Tenerife and Valencia).

“Italy and Spain have offered outstanding deals and therefore we have focused on those markets. If we open six bases in the next year, one or two will probably be in Central Europe. The UK, Spain, Scandinavia, Central Europe and possibly North Africa will be our focus in the coming year,” he said.

Looking ahead, O’Leary confirmed that Ryanair is positioning itself for a future aircraft order. “We are talking to manufacturers, including Boeing, Comac in China and the Russians and we are happy to take aircraft from 2016 onwards. The situation is changeable and it is dependent on the manufacturers. We are positioning ourselves with no order but bundles of cash,” he said.

In 2011 Ryanair put 22 new aircraft into operation, opened five new bases and 301 new routes, with 117 airports gaining new services. Ken O’Toole, Ryanair’s Director of New Route Development, highlighted the importance of the Spanish market during an Airline Briefing at Routes Europe earlier in May. He said Spain had received nine new-based aircraft in the past year. O’Toole highlighted the LCC’s moves into Barcelona, Seville, Valencia and in particular Tenerife, saying growth in the Canary Islands has been strongly supported by the regional government’s incentive scheme. “In 2009 we delivered 900,000 passengers to the Canaries and in 2011 we will deliver four million,” he said.

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Click here to watch an EXCLUSIVE interview with Ken O'Toole from the recent Routes Europe event in Cagliari, Italy.

O’Toole said there remains many opportunities in Europe and that Ryanair has added 15 new airports in 11 countries since October 2010 – including Tallinn in Estonia, the host of next year’s Routes Europe event. “We are engaging with the smallest to the largest and we believe we have something to offer everyone,” said O’Toole.

For airports looking to land Ryanair service, in 2012 the airline will receive 22 new aircraft, 10 of which are already allocated and it will take delivery of an additional five in 2013. From 2012 onwards, O’Toole said it would be a case of “moving capacity in the network to optimise returns,” rather than any growth and this will be case until a new aircraft order is placed.