A tale of two airlines: the good and the bad

Author: By Sarah Arnott

Although the group’s ?387m (£350m) profits were distorted by a 42 per cent fall in fuel costs after 2008’s sky-high oil price spike, and mask a 17 per cent decline in average fares, passenger numbers shot up by 15 per cent in the six months to the end of September to reach a total of 36.4 million.

Michael O’Leary, Ryanair’s chief executive, said the carrier is reaping the rewards of the recession that is decimating more expensive rivals’ businesses, and is on track to hit the target of 66 million passengers by the end of the fiscal year.

“We will overtake BA in the UK market this winter,” Mr O’Leary said. “We may well overtake Alitalia to be the number one in Italy by the end of 2010. We are already number two in Spain, and expect to overtake Iberia by the end of 2010.”

The outlook for the market as a whole remains grim, with Ryanair predicting that fares could come down by as much as another 20 per cent over the rest of the year, as yields drop by a fifth, leaving losses of as much as ?150m. But the company will still meet its full-year predictions at the lower end of the ?200m to ?300m range, according to Mr O’Leary.

“In the next 12 months, the businesses that will do well are Ryanair, Ikea, McDonald’s and Aldi,” he said. “We love deep downturns. We will be trading very profitably when all around us are blowing their brains out.”

Mr O’Leary also took the opportunity to advise the market that if a deal with the aircraft supplier Boeing over Ryanair’s 200-strong order cannot be struck by the end of the year, the carrier will tear up its growth plans and redistribute cash to shareholders instead.

If Boeing cannot agree to share some of its “enormous savings” on supplier and manufacturing costs, then Ryanair will break off the arrangement, cancelling at least 10 aircraft and deferring others. “Discussions with Boeing are going nowhere in a hurry,” Mr O’Leary said. “The discounts we are looking for are relatively small, but we can’t get anybody at Boeing to make a decision on this because they have a degree of internal turmoil.”

… and the not so good: BA cabin crew unions call for strike action

Christmas holidaymakers flying BA face massive disruptions after trade unions yesterday recommended cabin crew vote for strikes from 21 December.

More than 2,500 BA staff attended a meeting at Sandown racecourse yesterday afternoon to hear the details of plans for industrial action that will now go to the vote. The results of the ballot will be announced at another mass meeting on 14 December.

The row with BA management has been rumbling for months as the company tries to strip out costs in the face of spiralling losses. It aims to cut the equivalent of 1,700 cabin crew jobs through a combination of voluntary redundancies and shifting to part-time. But changes to terms and conditions have provoked ire from staff and negotiations have run into the sand.

In July, BA posted its worst-ever financial performance with a £401m loss. And analysts are predicting further losses of up to £250m at first-half results to be posted on Friday.

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