Low-cost airfares will have to be grounded, warns O'Leary
Published 13/09/2010 | 05:00
THE days of bargain-basement air fares are coming to an end, Ryanair boss Michael O'Leary has warned.
Ryanair's average fares of €40 will not be sustainable in the future as the company attempts to cut costs and moves to more central airports across Europe, he added.
Comparing Ryanair with cheap brand-driven supermarkets like Lidl, Mr O'Leary said the airline would have to re-focus its emphasis on the quality of its brand rather than price over the coming years.
"We have to move away over the next number of years from being obsessed with having the lowest fares in the market," he said.
"At the moment we just pile it high and sell it cheap. Lidl started off cheap and cheerful but now it is very sophisticated -- it is no longer perceived to be cheap and cheerful," he said.
Like many airlines, Ryanair is facing pressure on costs but, as it moves to entice new customers, it will also have to move operations to more expensive central airports across Europe.
Recently, it has begun running major operations out of Edinburgh and Barcelona El Prat, as it seeks out more upmarket customers. However, the increase in fares is not expected for a number of years.
Mr O'Leary also said he would stay at the helm of Ryanair until the business doubled in size from over 200 aircraft currently, although he did not give a timeframe.
"Then the growth rate slows down to 2pc or 3pc per year. You will need a different management then," he said in an interview in a British newspaper yesterday.
"We won't need my dog and pony show, which is about generating publicity. Every company has to move from being the high-growth Robin Hood."
Over the past two weeks, the no-frills airline has pulled out of Belfast City Airport and cut the number of flights from Shannon, arguing that higher costs fuelled the move.
The Shannon move will mean the closure of Ryanair's Paris route from November 1 and a reduction in the frequency of flights to Gatwick and Stansted.
Ryanair carried 7.68 million passengers in August, 12pc more than in the corresponding month last year, according to the most recent figures.
Its load factor -- or percentage of seats filled on aircraft -- slipped one percentage point to 89pc.
In the 12 months to August 10, the airline carried 70.9 million passengers and had an average load factor of 82pc.
The year-to-date figure includes 1.45 million passengers who were booked to fly on flights that were cancelled due to airport closures across Europe in April and May over volcanic ash concerns.