ATW Daily News

Ryanair launches €400 million cost-cutting initiative

Thursday March 27, 2008

Ryanair is reviewing all of its major costs, including airport expenses, staffing, fuel and currency exposure, in an effort to offset the rise of oil prices to more $100 a barrel.

The cost-reduction program includes a pay freeze applying to senior management for 2008. "Given the enormous increase in our fuel costs, and the likelihood that profits over the coming year may fall, it is appropriate that Ryanair's senior management lead this cost-reduction program by example," CEO Michael O'Leary said. The LCC, which still vows not to add any fuel surcharges to its tickets, has hedging contracts at about $68 per barrel until April 1 and is largely unhedged thereafter.

Ryanair hopes to achieve some €400 million ($621.3 million) in savings over the next year through the cost-reduction initiative. O'Leary said he did not expect any direct increases in ticket prices although certain charges, like baggage and credit card fees, could be upped. "I just don't expect our fares to rise. I think our fares will be flat," he said.

He maintained the carrier's guidance that net profit could fall to €235 million in the next financial year starting April 1 (ATWOnline, Feb. 5) and said the forecast will be updated in June when it reports full-year results. "But I expect a 50% drop in profits in the next 12 months," he revealed.

Last month, O'Leary offered a gloomy outlook for 2008-09, citing the "possibility of a 'perfect storm' of higher oil prices, poor consumer demand, weaker [British pound] and higher costs at unchecked monopoly airports such as Dublin and [London] Stansted that account for a significant proportion of Ryanair's traffic."

by Cathy Buyck

Other headlines: