Business Irish

Friday 22 March 2019

O'Leary wants rivals wiped out by oil prices

Ryanair CEO Michael O'Leary at a press conference at the Alexander Hotel yesterday where he called for an end to PSO (Public Service
Obligation) subsidies which amounts to €45m (€15m per year) which Ryanair said could be better spent on the healthcare service or
education
Ryanair CEO Michael O'Leary at a press conference at the Alexander Hotel yesterday where he called for an end to PSO (Public Service Obligation) subsidies which amounts to €45m (€15m per year) which Ryanair said could be better spent on the healthcare service or education

Laura Noonan

RYANAIR chief executive Michael O'Leary is now hoping oil will stay at $125 to $130 throughout the winter so weaker airlines will collapse and his airline can raise fares.

The aviation boss previously warned that high oil prices and a 5pc dip in yields could see Ryanair's profits plunge as much as 50pc for the year ending March 2009.

Speaking at a Dublin briefing yesterday as oil tipped new highs of $132, the Ryanair chief said he now wants the prevailing oil prices to continue, despite the short-term pain.

"I've now come to the view that I hope oil does stay at $125 or $130 a barrel during winter because I think that will bankrupt half of the airlines flying today," he said.

"In which case we'll still be the lowest-fares airline in Europe, but our fares won't be €40 a passenger, they might be a little bit higher."

If oil were to average $135 a barrel for the 2009 fiscal year and yields were to fall 5pc, Ryanair would still break even, Mr O'Leary said.

"That doesn't mean we'll only break even," he added. "There's two variables in there, oil and yields, so there's not a set oil break-even point."

He later added that the euro/dollar exchange rate would also play a part in the equation.

Ryanair is heading into the summer season fully un-hedged. Mr O'Leary said it would be "madness" to hedge at the current prices, while admitting he has "been wrong about oil for the last 12 months".

If oil falls below $100 a barrel, Ryanair will "be buying as much as we can".

If oil drops to the "mid teens" the airline "might" buy, he added.

Despite the global aviation downturn, Mr O'Leary said prices for the airline's secondhand 737 planes were still "remarkably high".

"The demand is coming from places like Russia, Asia and the Indian sub-continent," he said. "Those things [oil prices and aircraft demand] cannot continue ad infinitum, the price of oil will have to fall or the value of aircraft falls."

Mr O'Leary said Ryanair's own balance sheet won't be adversely hit by a drop in aircraft prices since their planes were bought cheaply. Ryanair shares fell by 6.7pc to €2.58.

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