Ryanair ready to start a price war in 2021

Ryanair CEO Michael O’Leary says airlines will discount fares over the next couple of years to try to recover lost business.

Rubbishing claims by the legacy airlines that it will take years for airlines to recover, O’Leary said volumes will rise ‘pretty quickly’ during 2021 and 2022.

“They’ll go back because airlines, led by Ryanair, will discount prices, the hotels will discount prices into the summer of 2021, the winter 2021 into the summer of 2022; we will all discount to try to recover the business we have lost,” he said.

The Ryanair boss admitted it could be three or four years for prices to recover to 2019 levels.

Speaking in a one-to-one session at WTM Virtual, Michael added: “Airlines that adept quickly, flex the business as quickly as they can, will emerge out of this much stronger and much more able to offer consumers the really low fares that they will want and need to spring the recovery.”

News this week of at least one Covid vaccine on the horizon had created a sense of optimism, said Michael. “There is reasonable optimism now that summer 2021 will get back to some degree of normality, we may not get back all the way to 2019, but in shorthaul I see no reason why we won’t get back to 70%, 80% of 2019,” he added.

He said the biggest challenge would be recruiting and training pilots and crew.

This winter was already ‘a write-off’, but the industry might be able to rescue some business for Christmas, he said. “Then nothing will probably happen until next Easter.”

Ryanair won’t let a good crisis go to waste

Ryanair is in ‘intensive negotiations’ with a number of airports where other airlines have pulled out due to the pandemic, said Michael. He said airports realised the only way they were going to return to growth was by working with flexible airlines that can rapidly deploy aircraft and crew, like Ryanair.

“What was different about Ryanair and most of our competitors during the crisis is that we kept flying our aircraft. What we have done frantically, and to our cost, is keeping all the aircraft flying, keeping all our pilots and cabin crew current, so that really we can pounce on growth.”

He said there would be an enormous ‘snap back’ in travel demand. While there might be a reluctance to go back to longhaul, he added: “I think there is going to be an invasion of the beaches of Spain and the Algarve and the Balearics and Greece and Italy. They are really going to see a surge in that intra-European tourism next year and we need to be there, providing the capacity at low prices, keeping fares down.”

 

Ryanair on its rivals:

Norwegian

Asked whether Norwegian will survive its latest cash crisis, Michael said: “I don’t think so. Norwegian will either finish up as a tiny Norwegian domestic airline or somehow it will get merged into SAS as some tiny, Scandinavian model of loss-making inefficiency.”

Easyjet

“The challenge for EasyJet is the balance sheet is getting destroyed, they are under pressure from Stelios [Easyjet founder and still a major shareholder] to shrink the fleet which is not what you do coming out of a crisis; where there is opportunity to acquire more aircraft cheaply, you expand faster,” said Michael.

“They are doing a lot of sale and leaseback at very distressed prices, at high cost. In time they will emerge out of this with a higher cost base.”

Michael said he thought Easyjet would shrink its business back to core airports, including Gatwick, Paris, Berlin and Switzerland. “They will still have a strong niche as a higher cost higher fare mid-level model, but as a competitor to Ryanair I don’t think they will be in the neighbourhood.”

Wizz

“Wizz is a well-run operation, it will certainly emerge as the third low-cost carrier in Europe; I think if anything Covid has accentuated the extent to which you are going to see the emergency of four or five major airlines in Europe, which will be IAG, Air France/KLM, Lufthansa and Ryanair,” said Michael.

“Wizz will certainly emerge in Europe as the next best in Europe behind Ryanair, with respect a long way behind Ryanair but with a lower cost base than EasyJet.”

Norwegian’s slots are likely to become available at Gatwick, which he said would be grabbed by Wizz. “I don’t see Norwegian re-emerging at Gatwick. It will be interesting to see Wizz squaring up to EasyJet at Gatwick. Wizz has realised they can undercut easyJet at Gatwick but they can’t undercut Ryanair at Gatwick.”

British Airways

“The challenge for IAG will be Brexit and whether it can keep BA within a EU-owned group.

“IAG will emerge stronger with a lower cost group because they didn’t have access to the same state aid as other European airlines.”

Air France/KLM

He said Air France and KLM were led by able executives but added that state aid will fetter their ability to lower their cost bases for the next five to 10 years. But they will benefit from more protectionism, said Michael.

“In the short to medium term that will be difficult for us to challenge. But they will emerge out of this crisis with much inflated cost bases than IAG, Ryanair, EasyJet and others that didn’t have access to the same level of state aid.”

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