Business Irish

Sunday 25 August 2019

Ryanair U-turn after blunder over low-cost flights to US

Ryanair CEO Michael O'Leary
Ryanair CEO Michael O'Leary
Ryanair's Kenny Jacobs
John Mulligan

John Mulligan

Ryanair has been forced into an embarrassing and highly unusual U-turn, saying it was not planning a transatlantic service – for tickets costing as little as €15.

In a major blunder, the country’s second-biggest company had to issue a humiliating statement to the stock exchange saying its board had not approved a move on flights to the US.

The airline had announced two days earlier its board had approved flights between Europe and the United States, and planned to start services to up to 14 US cities by the end of the decade.

Ryanair boss Michael O’Leary said the airline had “f***ed up”, describing the original statement as “a miscommunication”. But the error is hugely damaging to the credibility of the company and raises enormous question marks around its management.

It is understood Ryanair still intends to eventually launch a transatlantic service, but will do so using a subsidiary or a completely separate business in which it may have a majority stake.

Earlier this week, the airline said it was already talking to manufacturers about buying planes to serve new routes between European airports and US.

Mr O’Leary has long spoken about his desire for Ryanair to carry passengers across the Atlantic.

But the company is understood to have struggled to find a way to make it pay.

Last night, Ryanair issued a terse one-line statement last night saying no transatlantic plan had been approved by its board - and nor would it be.

Financial analysts described the blunder as a serious misstep for the airline.

"It's a bit of a PR faux-pas," David Holohan, the head of research at stockbroking firm Merrion Capital.

"They usually tend to have quite a good grasp of what they should be saying."

It's not clear precisely how the cock-up emerged, but Monday's statement appears to have been prompted by a follow-up question from the media on foot of an interview earlier that dau by Ryanair's chief marketing officer, Kenny Jacobs.

Mr Jacobs indicated the airline would fill up to half its jets with more expensive premium seats - with some subsidised promotional fares costing as little Stg£10, other one-way tickets would be priced at Stg£99 or more.

Not considered

Ryanair said in a statement last night: "In the light of recent press coverage, the board of Ryanair Holdings Plc wishes to clarify that it has not considered or approved any transatlantic project and does not intend to do so."

Now it is understood that while Ryanair still intends to launch a transatlantic service, it will not do so using its own name.

Instead, a separate company will have to be set up as a standalone business.

Mr O'Leary has previously made clear that Ryanair would not directly launch or operate the service. Rather, it would be run by a stand-alone business that would not be an immediate part of Ryanair.

The outspoken airline chief said in January that the airline wanted to launch a long-haul service using a sister company.

He said he'd be disappointed if that division couldn't offer one-way tickets between Europe and the US for an average of about €90.

But it's unlikely Ireland will benefit - at least initially - from the cut-price tickets.

"If we wanted to get into the pan-European transatlantic market, then starting in Dublin would be the wrong place to start. It's a tiny market," said Mr O'Leary previously.

The carrier said in a statement this week that it was talking to manufacturers about buying planes to serve new routes between various European airports and 12 to 14 American cities.

"European consumers want lower-cost travel to the USA and the same for Americans coming to Europe. We see it as a logical development in the European market," a spokesman said on Monday.

"The business plan is there but it's dependent on attaining viable long-haul aircraft and we estimate that's four to five years away."

Largest budget carrier

Ryanair confirmed its position as Ireland's second biggest company late last year - valued on the stock market at €11.5bn - after its shares rocketed nearly 10pc on the back of financial results and increased full-year profit forecasts.

The airline is Europe's largest budget carrier with 86.4m passengers last year. It has embarked on an ambitious plan to increase its traffic to 150m passengers by 2024 and Mr O'Leary is focusing on a cuddly 'new Ryanair experience'.

Icelandic carrier Wow Air will launch Stg£99 tickets from London Gatwick to two US cities with a stopover in Reykjavik later this year.

Norwegian Airlines started offering budget tickets between London and New York last summer. Other companies have learned the hard way of launching rock-bottom fares to the States. Freddie Laker launched low-cost flights to the US in 1977, only for Laker Airways to go bust five years later.

Irish Independent

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