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Ryanair expects big yield decline in price war
Ryanair chief executive Michael O'Leary has warned that the airline's yields or average fare levels could drop by up to 20 per cent over the next 12 months following a decline of 15 per cent in the year to end-March 2004.
Speaking at the launch of Ryanair's latest flight giveaway - to celebrate its 80 millionth passenger - O'Leary warned that a “ferocious” price war would break out this autumn, which could lead to the collapse of one or more of the smaller European low-cost carriers.
O'Leary suggested UK regionals and German low-cost carriers were most vulnerable to a price war, highlighting bmibaby, MyTraveLite, FlyBE., Germania, Germanwings and TUI-owned Hapag-Lloyd Express.
He claimed many were “losing money on a heroic scale. Most will not survive more than 18-24 months ... they won't all go bust but there will be consolidation, acquisitions, mergers”, adding that Ryanair did not intend to buy out any more competitors, following its takeover of Buzz early last year.
O'Leary went on to say that, even with a 20 per cent decline in yields, Ryanair would still break even as passenger numbers continued to increase.
The airline expects to carry 28 million passengers this year compared with 23 million in the financial year 2003-04. However, a 5 per cent fall in yields, as forecast in Ryanair's business model, would see its net profits increase by 15 to 20 per cent.
Ryanair will report its full year results on 1 June. O'Leary said yesterday they would be in line with guidance given in January for a 10% fall in net profits to around euro215m (£143.8m).
Separately, the airline announced it had launched Ryanair Breaks, 'a range of value-for-money short breaks and event packages, available to book online across Europe'. Packages will be grouped under four main themes: golf; spa & leisure; tickets & tours and outdoor breaks. The airline said prices for its golf packages started from euro4.5 (£3) per person for seven nights on the Costa Brava.
22 April 2004
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