The popular European budget airline is preparing for tough times. High oil prices and a weak UK economy are threatening Ryanair’s overall income; Chief Executive Officer Michael O’Leary says that in the next year, net-profit could in fact fall by 50%.
But O’Leary doesn’t want to see high oil prices translated into increases of airline fares. “I think our fares will be flat and that will be a good result I think,” O’Leary said. To keep those fares flat, he plans on freezing the salaries of 36 senior managers of Ryanair for a period of a year. This, along with an increase in baggage and credit card fees, is expected to save the airline 400 million euros over the next 12 months.
All of this is mostly because up until now, Ryanair has enjoyed hedging contracts of oil at around $68 a barrel. Those contracts run out April 1, 2008 meaning that Ryanair’s fuel costs will only go up; every $1 increase in oil above $65 accounts for 14 million euros in annual costs.
Yet even in a dreary looking economy, Ryanair is still managing to add a few more flights. In May 2008, passengers will be able to enjoy the first domestic routes in France (Paris to Marseille) and Germany (Frankfurt to Berlin).