Air fares will get cheaper says low cost airline
[November 3rd 2008]
Good news for airline passengers as low cost airline Ryanair predicts air fares will fall by up to 20% this winter.
“The recession will continue to drive down oil prices and fares this winter. We will continue to respond with lower fares and aggressive price promotions to keep Europe flying and to maintain our market leading load factors,” says Ryanair CEO, Michael O’Leary.
Ryanair has launched another seat sale this week, offering one million seats for €10 on 250 routes for travel in late November, early December and January.
O’Leary thinks that average air fares in the second half of the current tax year could fall by between 15% to 20%. He is also predicting more airline bankruptcies and consolidation.
“Many more loss making European airlines will go bust this winter because of unsustainable losses and insufficient cash reserves. Airline consolidation will continue as flag carriers merge into three high fare, fuel surcharging groups, led by Air France, BA, and Lufthansa,” O’Leary warns.
Ryanair has today announced half year profits down 47%. High fuel costs were to blame for Ryanair’s half year profits falling to €215 million. Fuel costs more than doubled, from €392.7 million to €788.5 million. Average fares also fell, by 4% to €47, as the credit crunch encouraged consumers to become more price sensitive and forced airlines to be more competitive.
Otherwise Ryanair turned in a strong performance as passenger numbers increased by 19% to 32 million and unit costs excluding fuel fell by 6%. Ancillary revenues also grew strongly, by 28% to €322 million.
“Achieving a half year net profit of €215m in very difficult trading conditions with record oil prices is a testimony to the strength of the Ryanair lowest fare model,” comments Ryanair CEO, Michael O’Leary.
O’Leary says the outlook for the remainder of the 2008/09 tax year depends on fares and fuel prices. Ryanair has bought 80% of its fuel for the third quarter at $124 per barrel, but is unhedged for the fourth quarter so the airline will have to pay the market rate at that time. If oil prices remain at $60-70 per barrel this should mean better profits at the end of the tax year.
Written by: Nick Purdom
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