Are you sure?

Ryanair still unhedged, sees recession

Ryanair Plc remains unhedged for its fuel needs beyond the end of this year and believes oil prices will resume their recent downward path after a record one-day rise on Monday.

“We're not hedged beyond December 31 this year, but oil prices will probably continue to weaken, particularly as the United States (economy) seems to be continuing to weaken,” the Irish no-frills airline's Chief Financial Officer, Howard Millar, told reporters at a news conference in London on Tuesday.

Ryanair warned in July that stubbornly high fuel costs and lower ticket prices meant it could make its first loss since 1989 this year.

The airline last week tweaked its guidance, saying it would break even this year if oil stayed at $100 a barrel and would return to “substantial profitability” in 2009.

Millar said Ryanair expected its average fares to fall about 5% in 2008/9, despite its prediction that its profits could fall “from €480 million down to zero” this year.

“We're heading into recession and people are becoming much more price sensitive. Our experience of recession is that fares generally fall,” Millar said.

“We are already seeing signs of this ourselves, despite a reduction in capacity.”

“People are more price sensitive and carriers will struggle to fill their seats unless they reduce fares.”

Millar said Europe's biggest budget airline was planning to ground 14 aircraft at London's Stansted airport this winter as it grapples with fuel costs and weakening consumer demand.

Last year, it mothballed seven aircraft based at the airport during the quieter winter months.

Millar also said Ryanair expects its appeal against the EU's decision to block its proposed takeover of fellow Irish airline Aer Lingus to take place early next year.

“We would hope that sometime after that, we would be able to continue with our bid,” Millar said. “It's closer to happening than it was last year.”

Ryanair's chief executive Michael O'Leary said last year that the airline had begun working on plans for a no-frills transatlantic airline.

Millar said an eventual takeover by Ryanair of Aer Lingus could offer a way into the transatlantic market, but said any such operation would be a stand-alone legal entity.

Ryanair could set up a transatlantic airline alone if its efforts to buy Aer Lingus failed, although Millar said high oil prices and aircraft costs meant such developments were some way off.

“I wouldn't want you to read into this that we think we'll be in the long haul business in the next couple of years,” he said.

Millar repeated Ryanair's view that more of its rivals would go bust during the winter, but said his company expected to grow passenger numbers in the year to the end of March by 14% to 58 million.

“Our plan is to continue to grow while offering low fares,” Millar said, adding that he expected the number of passengers Ryanair carries to grow 15% to 18% next year to between 65 and 68 million.

That would be backed up by what Millar described as a “significant” route launch program in the spring.

Net of any aircraft disposals, Millar said Ryanair would take delivery of 122 new aircraft between now and 2012, adding to its existing fleet of 166 Boeing 737-800 aircraft.

Ryanair is talking to Boeing and Airbus about “very significant” aircraft orders beyond 2012, he said.

Despite the current downturn, Millar expects that by then, the airline will be carrying 80 million passengers a year and have annual profits of about €800 million ($1.18 billion).

“There's still going to be an appetite for low fares - people are not going to sit in watching the TV, they're going to want to go on holiday,” Millar said. “Low fares are here to stay and we'll continue to grow.”

In separate statements, Ryanair said it was launching six routes from Forli in Italy, to Alghero, Bari, Cagliari, Lamezia, Olbia and Palermo. It also urged the European Commission to abandon plans to include airlines in Europe's Emissions Trading Scheme, saying it would penalize efficient airlines while protecting inefficient carriers. (Reuters)