Aviation: Bullish Ryanair not quite so bullish now
When Ryanair's Michael O'Leary told a BBC interview recently that he thought that high oil prices would not be a problem for his company, his implication was that Ryanair would not be following the route of redundancies and route reductions. That's not the way it's panning out.
Ryanair, who are often credited with creating the first successful low cost, no frills, airline model are to cut flights and make staff redundant.
Around 500 staff will go in Dublin alone, and more than a dozen flights out of Stansted in the UK will be abolished. In fact the airline will cut 150 flights per week - a drastic reduction of more than 12% of its weekly schedule.
O'Leary now says that Dublin will see half a million passengers less this winter than last - and given Ryanair's substantial share of the Dublin market, that means the company will be hit hard.
O'Leary has changed his tune on fuel prices - which he said were not a major concern for Ryanair although it was no longer fully hedged. From arguing in the BBC interview broadcast on Asia Business Report that the company was not overly concerned, he is now saying the opposite, at least in part: "Oil prices have a bearing on it, but the cuts are coming at the two highest cost airports."
But he is also saying that it is operating costs at airports that are driving the changes. Increases in expenses at Dublin running at what he says is 40% in the past year are driving his costs ever higher at a time when margins are most squeezed. O'Leary's answer is to reduce the costs by flying out of Dublin less and keeping a smaller establishment there.
The Dublin Airports Authority is not sympathetic. It accuses O'Leary of trying to get a private deal to reduce his costs and of reducing the flights when he didn't get his own way - and that the airline's business model was at the heart of the problem.
In a comment to the Irish Times, a DAA spokesman said "The combination of a sharp economic slowdown in many of its key markets, its own failure to provide hedge against historically-high oil prices and its heavily loss-making investment in Aer Lingus are the key factors driving this decision to consolidate seasonal schedules and not airport charges, which are paid fully by the airline's passengers."
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