Ryanair hits back with summer fare war pledge

by BLOOMBERG

LONDONRyanair Holdings plc is girding for battle with its pilots and competitors alike.

The budget carrier is committed to a price war in the crucial summer period, in an attack on the likes of EasyJet plc, which has said easing competition will help mitigate higher fuel charges. At the same time, CEO Michael O’Leary warned yesterday he’s prepared to endure pilot walkouts rather than bend to union demands that would threaten the low-cost giant’s business model.

“We expect some localised disruptions and adverse PR so investors should be prepared for same,” O’Leary said in an earnings statement. “We are fully prepared to face down any such disruption if it means defending our cost base or our high-productivity model.”

The comments indicate that after months of introspection, the Dublinbased airline famous for its hardball attitude is rearing its head again. While it’s reached a deal with pilots in its largest market, the UK, talks in Ireland and Germany have been tougher. The company said some disruptions are “inevitable” as it grinds out deals across its European footprint.

To ease investors’ concerns, Ryanair said it plans to buy back as much as €750 million (RM3.65 billion) in stock. Still, the shares fell 3.1% to €15.64 at 8:09am in Dublin yesterday, valuing the discounter at €18.5 billion.

The carrier vowed not to pass on the added costs of labour or rising fuel prices to its customers. That’s going to put pressure on competitors like EasyJet, which is forecasting summer fare increases as the demise of rivals like Air Berlin eases competition in Europe.

“There is over-optimism from the other airlines that they’re going to cover their additional fuel costs and then add on massive fare hikes on top of that,” CFO Neil Sorahan said in an interview. “I can’t see it happening. Fares will be under pressure.” — Bloomberg