April 15, 2020 / 2:53 PM / 2 months ago

Exclusive: Ryanair sees price war fuelling rapid air travel recovery

PARIS (Reuters) - Ryanair (RYA.I) is steeling for an airline price war that it expects to win once coronavirus restrictions are lifted and passengers flock back to tourist destinations, Chief Executive Michael O’Leary told Reuters on Wednesday.

FILE PHOTO: Ryanair plane is seen at Luton Airport as the number of coronavirus cases grow around the world London, Britain, March 17, 2020. REUTERS/Peter Cziborra

Brushing off forecasts of a sluggish recovery, O’Leary predicted a swift traffic rebound, with the pain coming instead from “massive price-dumping” that traditional airlines now seeking bailouts would struggle to keep up with.

His bullish outlook puts the Ryanair boss at odds with peers such as Lufthansa (LHAG.DE) and analysts who see a return to 2019 traffic only around 2023-4. Plane manufacturers and airline body IATA have also warned of a slow recovery from the pandemic.

O’Leary also voiced dismay at the multibillion-euro aid packages sought by Lufthansa and Air France-KLM (AIRF.PA) and said Ryanair was appealing against EU-approved French tax breaks that exclude airlines registered in other European states.

An Air France-KLM spokeswoman declined to comment.

Ryanair assumes European flights will stay grounded until a “limited” resumption in June, O’Leary said. After that, a resurgence of intra-European travel will be driven by steep discounts on last-minute holidays in July-August.

“Lots of people across northern Europe have been locked up in apartments,” he said. “They will all want to go on holiday before the kids go back to school as long as they can do so in reasonable safety.”

Ryanair backs anti-coronavirus measures including masks and temperature checks for passengers and crew, while rejecting calls for planes to fly one-third empty.

Before too long, “volumes will be back on a normal footing but on lower pricing” O’Leary predicted. “The minute we’re about to start flying again we’ll start doing seat sales, and so will every other airline.”

But a low-cost model and robust balance sheet make Ryanair better prepared for a fare-slashing recovery, with pricing unlikely to improve before next year, he added.

BUMPER 2021

“Whether it’s 9.99 euros, 4.99, 1.99 or 99 cents per seat, we almost don’t care - our critical thing in the short term isn’t to make money, it will be to get our pilots and cabin crew back flying and the aircraft back in the air,” he said.

For Ryanair, nonetheless, “2021 has every prospect of being a bumper year in terms of earnings,” O’Leary also predicted. “Pricing might be lower but oil prices will be lower” and airports will cut charges to encourage traffic growth.

Sounding another discordant note amid the coronavirus gloom, he said the summer of 2021 had huge potential as holidaymakers make up for the previous year’s thwarted plans.

O’Leary said he planned to hold onto all existing Boeing (BA.N) 737 MAX jet orders and even dangled the prospect of adding more of the currently grounded planes - and repeating a Ryanair habit of buying when demand and prices are low.

“I don’t think there are that many airlines out there at the moment looking to order more aircraft,” he said. “I would think the pricing would be pretty keen in the next 12 months.”

O’Leary said he expected Boeing to resume 737 MAX production in the second half of 2020, with the first of 135 MAX jets on order likely to reach Ryanair in late 2020 or early 2021.

Reporting by Laurence Frost; Additional reporting by Conor Humphries in Dublin, Sarah Young in London and Tim Hepher in Paris; Editing by Mark Potter

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