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Announcing third quarter net profits down 27% to ”35m ($52m) Ryanair CEO, Michael O”Leary painted a gloomy outlook for the next couple of years.
”With oil prices at $90 a barrel and fear of recession in the UK and many other European economies, the current outlook for the coming fiscal year is poor,” he said, adding: ”We remain essentially unhedged for next year.
”To compound this negative outlook, European consumer confidence is waning, which would suggest that, unlike two years ago, when higher yields compensated for higher oil prices, next year”s yields may be flat or continue to fall.
”The European airline sector is presently facing one of these cyclical downturns, with the possibility of the ”perfect storm” of higher oil prices, poor consumer demand, weaker Sterling and higher costs at unchecked monopoly airports such as Dublin and Stansted.”
O”Leary”s pessimism centres around the twin pressures of oil prices and airport charges, with the Ryanair boss forecasting the profits could slump by 50% if the airline saw a 5% drop in yields.
He particularly trained his sights on Dublin Airport ” long a source of angst for the low-cost carrier ” where he says the government-owned facility is raising prices by up to 50%, citing a ”crazy” ”800m second terminal, whose cost he maintains, has quadrupled from ”200m.
And Ryanair”s main UK base at Stansted did not escape his withering criticism either. ”We continue to campaign for the break-up of the BAA airport monopoly in London and/or a more effective regulatory regime that than operated the by inept CAA Regulator,” he said.
”The CAA stood idly by last year while Stansted Airport doubled passenger charges and at the same time, delivered abject service to airlines and passengers.”
But despite the shaky economic outlook, O”Leary is robust in his confidence that Ryanair can weather any storm, perfect or otherwise. His view is that the airline will continue to drive down fares to stimulate price sensitive traffic, as well as continuing to open new routes and bases across Europe.
”We have seen these downturns before,” he said. ”They pose unique long-term opportunities for the lowest cost producer ” Ryanair ” to grow rapidly, open new markets and speed up the pace of industry consolidation.”
Ryanair load factor dipped two points to 69% on the back of a 17% rise in passengers to 3.68m.