I want a recession says Ryanair chief

Feb 5 2008 by Iain Laing, The Journal

ABUDGET airline chief has forecast that the UK is heading for a recession and that this would be “great for the aviation industry”.

Ryanair chief executive Michael O’Leary admitted his airline’s profits could dip 50% this year. But he added Ryanair fares would come down and that people would continue to want to fly, even through a recession.

Mr O’Leary also said his carrier would continue to increase charges for those checking in luggage until they chose to fly with carry-on bags only.

He said: “I don’t know why we are trying to avert a recession. We need a recession. I think it would be great for the aviation industry.”

Mr O’Leary went on: “A recession will get rid of environmental taxes and a lot of the environmental nonsense that’s talked about.”

He added recession would also “end the regulatory incompetence” which he sees as harming the airline in terms of what it is charged for using Stansted and Dublin airports.

“A recession is now likely, I don’t think it can be averted by reducing interest rates. We would welcome a good, deep recession for 12-18 months.

“During recessions travel does not get cut back but people look for cheaper alternatives.

“If we get a recession I don’t see people cutting back on the amount of flying they do.”

Mr O’Leary was speaking after Ryanair announced it made an adjusted after-tax profit of £26m in the period October-December 2007 – 27% down on the same period in 2006.

He warned the European airline sector was facing the possibility of a “perfect storm” of higher oil prices, poor consumer demand, weaker sterling and higher airport costs.

The economic climate could lead to some low-cost competitors facing problems but Ryanair was determined to slash fares.

Mr O’Leary also said that Ryanair was expected to reduce the number of winter flights it made at Dublin airport and possibly also at Stansted.

He again stressed that Ryanair would never introduce fuel surcharges and said those who grumbled about the charges for checked-in luggage should “stop complaining” and arrange things so they could travel with hand luggage only.

Ryanair hoped to increase annual passenger levels by 19% to 50 million in 2008, rising as high as 83 million by 2012, he said. The no-frills carrier also planned to double its aircraft numbers and its profits by 2012, he added.

Panmure Gordon analyst Gert Zonneveld said that Ryanair was better-placed than its rivals to tough out more difficult trading conditions. He said: “Ryanair has a strong track record and a proven business model with arguably the lowest cost base and highest profit margins in Europe.

“It has gone through difficult trading periods before, and the current one certainly will not be the last.”