Cost cuts as Ryanair sees profit halving
26.03.08
Ryanair Chief Executive Michael O'Leary expects profits to halve this year and will freeze pay for top executives as the budget airline seeks to avoid raising ticket prices to counteract high fuel costs.
The airline warned in February high oil prices, a faltering UK economy and weak sterling could mean net profit could halve in its business year starting in April. Mr O'Leary told a press conference today: ‘Our guidance remains the same from our last. We will update this in June at our results but I expect a 50 percent drop in profits in the next 12 months.’
‘The next 12 months will not be pretty for net profit and will not be pretty for shareholders. We will have a better feel for it in June. I don't have that feel at the moment.’
Despite continued concerns over fuel costs, Mr O'Leary said he did not foresee any direct increases in Ryanair fares although some charges would rise. He said: ‘I just don't expect our fares to rise. I think our fares will be flat and that will be a good result I think.'
He said Ryanair hopes to achieve €400 million (£315 million) in savings over the next 12 months through cost-cutting measures including an indefinite management pay freeze which he said could recoup up to €10 million.
He said: ‘We are renegotiating airport contracts, handling contracts, maintenance contracts ... we want to reduce costs in every single area of the operation. Baggage fees and credit-card charges will go up. Partly to reduce costs but more importantly to encourage passengers to take hand luggage and reduce our check-in costs. We will move to kiosks very soon.'
Mr O'Leary added that he expects Ryanair to remain largely unhedged for the rest of 2008 once its current $68 per barrel fuel hedges expire from 1 April. He said: ‘I reckon we will take our chances on current price of oil for the rest of the year,’ adding Ryanair would probably hedge again if the price of oil dropped below $80 per barrel.
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