Ryanair reported record summer profits, but Chief Executive Michael O’Leary warned winter is “very fragile.”
ATTILA KISBENEDEK / Contributor / Getty Images
Ryanair on Monday reported record summer profits, but CEO Michael O’Leary warned that the winter is more likely to be “very fragile.”
“We glance set for a robust winter but I’m conscious last 12 months we had omicron at the tip of November which crushed Christmas and the Ukraine invasion crushed Easter,” O’Leary told CNBC’s “Squawk Box Europe” on Monday.
The Irish airline posted its largest ever after-tax profit for the six months to September at 1.37 billion euros ($1.37 billion) on Monday.
There was an expectation that demand could shrink because the cost-of-living crisis takes its toll on household budgets across Europe, but appetite for travel remains to be there, he said.
“We have been waiting for demand to tighten up but we have not seen it yet — but there’s a fragility there,” O’Leary told CNBC. “[People] were locked up for 2 years [during the Covid-19 pandemic], travel is certainly one of the things they are going to keep doing,” he said.
Way forward for European air travel
Looking ahead, O’Leary said the “real overhang” for the following two to a few years will probably be higher financing costs as rates of interest have soared, which can likely cause the disappearance of airlines that may’t sustain.
“I believe we’ll see in the following 4 to 5 years the ultimate consolidation when Europe moves to 4 large airlines, three big connecting carriers and one large low-cost carrier,” O’Leary said, with Ryanair filling the “low-cost carrier” spot.
Price will probably be the tipping point for determining which airlines survive in the following decade, in accordance with O’Leary.
“The actual barrier to entry to Europe in the following 4 to 5 years goes to be ‘are you able to compete with Ryanair at £9.99?’ and for those who cannot, then don’t try,” he said.
Seismic change
Ryanair committed to being carbon neutral by 2050 in March, but supplies for sustainable aviation fuels remain small, in accordance with O’Leary.
The airline is adding more Boeing 737 MAX aircraft to its fleet, that are able to carrying 4% more passengers and burn 16% less fuel, although production has been delayed as a result of supply chain issues.
Latest engine technology is one other way the sector will eventually improve its environmental credentials, but engines that might cause “seismic change” within the industry won’t be available “before 2030, 2040,” O’Leary added.