Company Watch - Ryanair

AirGuide Business, July 21, 2008

7/21/2008

A Dutch court upheld on Thursday the introduction of a tax on passenger flights, despite an appeal from airlines and industry bodies, the Finance Ministry said in a statement. The tax, which took effect on July 1, will add EUR11.25 euros (USD$17.69) to the cost of a short-haul flight and EUR45 to flights longer than 2,500 km. The court ruled that the tax was not in conflict with European and international law. The appeal against a previous case upholding the tax in March was brought by airlines including Ryanair, Maastricht airport and industry bodies. Pieter Verboom, the chief financial officer of Amsterdam's Schiphol airport, said in March the tax would cap passenger traffic growth and profits for the year and said low-cost carriers were switching to airports outside the Netherlands. Schiphol lost its fourth place in Europe's passenger airport rankings to Madrid last year, despite a 3.8 percent rise in 2007 passenger numbers to 47.8 million. 7/18/2008

Ryanair also announced the launch of new service from Leeds Bradford to Girona (four-times-weekly beginning Oct. 1) and Alicante (thrice-weekly from Oct. 28). 7/18/2008

Ryanair will close its operations from Nov. 4 to Dec. 19 at Basel, Budapest, Krakow, Palma, Rzeszow, Salzburg and Valencia, citing the fact that "costs at these airports are amongst the most expensive in Europe and far outweigh the potential revenue which passengers are prepared to pay, particularly during the off-peak winter period." It said requests for relief similar to that extended to BAA were rejected by the seven continental airports. "In the absence of this support, Ryanair has no alternative but to cancel these routes [temporarily] and develop its business elsewhere." The six-week-plus closures will result in the loss of a combined 1,980 flights, with Valencia hit the hardest (504), and approximately 302,500 passengers. 7/18/2008

Ryanair's largest cutback will be at London Stansted, an airport the LCC said "is the most expensive" of its 28 bases and where charges jumped 15% this year and 100% last year, according to the airline. Ryanair will base 28 aircraft at STN this winter compared to 36 last year and reduce the number of weekly flights by 14% to 1,590. It will introduce seasonal service to Katowice (daily from Oct. 27), Fuerteventura, Ibiza, Tenerife, Malaga (all thrice-weekly from Oct. 28) and Basel (thrice-weekly from Dec. 21)--flights factored into the reduction--and said it expects winter passenger numbers to drop by approximately 900,000 year-over-year. The carrier said it offered to operate the aircraft "in return for a substantial discount on airport charges applicable to these flights for the winter season only" but that airport operator BAA refused. "When a regulated monopoly makes it more profitable for airlines to sit aircraft on the ground rather than fly them through the winter, then obviously the CAA's laughable regulatory regime has failed," CEO Michael O'Leary said. 7/18/2008

Ryanair also announced the cancellation of all flights to and from Derry today and Thursday due to an airport workers strike. 7/16/2008

Ryanair will cut its winter schedule at Dublin, reducing based aircraft to 18 from 22 and the number of weekly flights to 1,190 from 1,352. It estimated a passenger decline of around 500,000 from winter 2007-08. It said DUB is the second most expensive of its base airports and that a written request to the airport to have fees reduced was "dismissed by the DAA monopoly." It said the airport charges up to EUR15 ($23.84) per departing passenger. DUB suffered from radar problems last week, forcing cancellations. 7/16/2008

Ryanair, which made a net profit of EUR481 million euros in the year to the end of March, said its guidance was unchanged for this year. Ryanair said earlier this year it hoped to break even in the current year to March 2009, based on average fares rising some 5 percent and an average oil price of USD$130 a barrel. On Tuesday, oil was traded as high as USD$146. All in all, Ryanair expects to ground just over 10 percent of its fleet for the winter, O'Leary said, adding he expects Ryanair to carry about 58 million passengers in the year, 1 million fewer than an earlier forecast. The bulk of the cuts will come from Dublin and Stansted, though there will be expansion elsewhere. Earlier on Tuesday, Ryanair announced four new routes and increased capacity in the Swedish capital Stockholm. 7/15/2008

Ryanair CEO Michael O'Leary said the disruptions cost the LCC nearly EUR1 million ($1.6 million) per day, according to comments cited by Reuters. It canceled 74 flights last Wednesday. Ryanair claimed on its website that the Shannon ATC backup plan, "which was specifically designed to immediately replace or back up the Dublin radar system in the event of a system failure," was not implemented during five weeks of difficulties. 7/14/2008

Ryanair's CEO O'Leary said regarding the purchase this month of an additional 3.5 million shares in Irish rival Aer Lingus, O'Leary said: "We had kind of EUR5 million lying around with no home for it so we bought them." But he added that Ryanair was now too close to the 30 percent mark, at which it would be obliged to launch a full takeover bid, to be actively seeking to buy more shares. The European Commission last year blocked a bid by Ryanair for Aer Lingus on competition grounds but subsequently also rejected a request from Aer Lingus that it force Ryanair to reduce its stake. 7/15/2008