Ryanair to cut fares as oil price tumbles
Published 11/12/2015 | 02:30
Ryanair is to lower its fares by as much as 10pc next year as it takes advantage of falling oil prices.
Addressing the annual Dublin Chamber of Commerce lunch yesterday, chief executive Michael O'Leary also revealed that the airline is planning to open a base in Belfast.
Ryanair's average fare is currently about €47 one-way. Mr O'Leary says he expects this to fall to about €42 next year.
This is because the company is paying less for its fuel, due to a reduction in oil prices.
The cost of oil has plummeted over the past 12 months and this week sank beneath $40 (€44) a barrel for the first time since the financial crisis.
Ryanair buys its fuel in advance, a policy called 'hedging', which most airlines do in order to protect themselves from market shocks and allow them to budget in advance.
However, this policy meant Ryanair was locked into paying for about 90pc of its fuel at $90 (€98) a barrel when oil prices were crashing. Ryanair's level of hedging is slightly above average, compared to other large European airlines.
The company's results for 2015 show that it hedged 90pc of its fuel costs at a rate of $92 (€100) per barrel for its 2016 financial year, which runs until March 2016.
For its next financial year, the company has been able to take advantage of the falling price and is now hedging at about $62 (€68) a barrel.
As a result, Ryanair says it will save about €430m, which he claims will be passed on to its consumers.
Speaking yesterday, Mr O'Leary said: "Next year, we have already bought forward our oil, we have saved about €430m for next year.
"We are going to use that to lower our prices. Those kind of oil savings will enable us to lower our fares by about 10pc across the board next year.
"I expect that €47 average fare to be €42 and if we pass on those savings we will have even fewer competitors at the end of the cycle."
At the Dublin Chamber of Commerce annual lunch yesterday, Michael O'Leary achieved one of the hardest things to do in business - make a sales pitch funny and informative. Here are some of his best one-liners:
"You can now select your own seat on board, [and now] we're introducing a new 'father fare' next year where we will sit you about as far away from your children as possible."
[Regarding the abolition of the travel tax]: "Michael Noonan ran into significant opposition from... the public sector [saying] 'don't scrap the tax, people don't really mind paying extra'. If people didn't mind paying extra, I would have had it out of them long before some civil servant."
[Regarding the airline's attitude to customers]: "Even more so than our competitors, our customers have been truly shocked that we won't torture you on a website that doesn't work."