Ryanair chief executive Michael O’Leary was in typically bullish form speaking at this week’s virtual World Travel Market, calling out forecasts of air travel’s slow recovery as “a load of rubbish” – instead predicting an “enormous snapback” – and slating “incompetent” governmental responses to Covid-19.
Secured by organisers as a keynote speaker guaranteed to swell the audience, the outspoken airline boss delivered a typical performance: scathing criticism for his targets, self-assured swagger in his airline’s prospects, and several profanity-laced soundbites.
“It’s easy to be critical of politicians because they do lots of stupid things,” he said in an opening salvo. “Did they [governments] mishandle the pandemic? Yes, probably. What’s been really concerning is the incompetence of European governments to put in place mass testing.”
He continued: “Neither we nor they have dealt with a pandemic before… [but] leadership has been pretty poor. Trump was abysmal; the European Commission was pretty poor as well.”
Testing for Covid-19 at airports, he said, is “a complete waste of time. It’s too late and takes too long. And what do you do at an airport terminal when you have a couple of positive tests?”
Rather, the airline is supportive of pre-travel testing. “Testing should not be at airports. It should be within 72 hours or 36 hours [of departure]. People should be coming to airports with a negative result.
“It should be widely available. The cost of €150 or €180 per test is prohibitive. Governments should be providing PCR testing free of charge. It will cost them a fraction of the money that lockdown and furlough schemes are costing them.”
O’Leary believes testing will help short-haul travel “come back quickly” but expects a more drawn-out recovery for long-haul travel.
And with an effective vaccine on the horizon, summer 2021 could deliver some degree of normality. Although operating at no more than 40 per cent of capacity this winter, O’Leary believes the airline could see 75 to 80 per cent of 2019 volumes by the summer.
He poured scorn on more conservative forecasts. “I’ve heard lots of rubbish coming out of mainly the legacy airlines… all rubbish. Volumes will come back in 2021 and 2022 pretty quickly… there’s going to be an enormous snapback in travel demand.”
The recovery will be driven in part by aggressive discounting of fares as airlines attempt to recover their losses, and it will be strongest in markets where “governments are sensible and reduce airport taxes and fees in the short-term”.
Ryanair is “pushing hard” with the UK government to waive APD which is “the most regressive and egregious tax on travel,” said O’Leary.
“There’s a real opportunity at government level to roll back on these ridiculous bloody taxes. If you really want to get tourism moving and the industry moving again you need to get the British government to withdraw APD for the next three to five years,” he argued.
In a positive note for corporates and consumers, he believes industry pricing will take longer to return to 2019 levels than passenger volumes – “perhaps three or four years”.
Turning his attention to European airlines, O’Leary was critical of the “instinctive reaction of most European governments to bail out loss-making airlines”.
He believes Air France-KLM and Lufthansa face enormous challenges in the next five to ten years because “state aid comes with so many restrictions”.
“They are going to emerge from this crisis with much greater and inflated cost bases than IAG, Ryanair, easyJet and others who have been forced – because we don’t have access to state aid – to really suffer some considerable pain on the labour side.”
He adds: “They will also attract more government protectionism. We can’t get slots at Schiphol because the Dutch government is paranoid about protecting KLM from competition.”
O’Leary also bemoaned the extension of the waiver to the ‘use them or lose them’ rule regarding airport slots which he believes will play into the hands of legacy airlines.
“We’ve opposed it. It shouldn’t be extended but it will be – I think to the summer of 2021. The risk is the more you extend that rule, there will be no incentives for the Lufthansas, the Air Frances and the KLMs to put capacity back into the marketplace. They’ll happily constrain capacity because they can block the slots and they’ll be charging very high fares on the limited number of flights they do operate.”
Changing targets, he took a swipe at low-cost airline Norwegian, which has admitted it is facing an uncertain future. The airline, O’Leary said, will “finish up as a tiny Norwegian domestic airlines” or “somehow get merged into SAS in a new Scandinavian model of loss-making inefficiency”.
EasyJet and Wizz Air will fare better, he believes, and could find themselves competing against each other for supremacy at London Gatwick if the latter can pick up slots vacated by Norwegian. “I don’t see Norwegian re-emerging at Gatwick. Wizz will see an opportunity to go in there and undercut easyJet.”
“Historically expensive” Gatwick is of no interest to Ryanair, however, with O’Leary instead eyeing an opportunity to grow at London Stansted following the closure of easyJet’s base at the airport.
Asked about a recent report from ACI that warned of the closure of 200 regional airports, O’Leary did not mince his words: “I never believe anything ACI says. Any forecast that comes out of ACI you can ignore. Secondary airports will be bailed out by their regions because they’re such huge employers and economic levers.”
He was similarly unequivocal on the prospect of a third runway at Heathrow and calls for a second at Gatwick, condemning them as ideas that “are going to disappear for another 50 years”.
And what of Ryanair’s long-term future? “We are poised at the dawn of an extraordinary era of growth. We need to be there providing the capacity and keeping fares down,” he said.
He has no doubts the airline is well positioned for travel’s return, with a strong balance sheet, an agile operation and new fleet in the pipeline which includes a variant of Boeing’s troubled B737 MAX. “It will be the most audited, the most interrogated, safest aircraft ever to fly,” said O’Leary.
“I’m very optimistic. I think we will grow to 200 million passengers in the next five years from 150 million now.”
Ramping up the bluster, he continued: “If I was starting an airline from scratch today, I wouldn’t. [Because] in Europe you couldn’t do a better job than Ryanair does. I’m not sure it’s possible to replicate what we’ve done. We’ll be unchallenged in Europe for the next 10 to 20 years.”
O’Leary, who signed a contract last year to stay on as chief executive until 2024, finished: “If we get to 200 million passengers by 2024, hopefully it [the airline] is making two or three billion a year in profit, the share price will have risen and I’ll be on a Caribbean beach somewhere.”