Monday November 2, 02:17 PM
Ryanair profits surge, warns Boeing on orders
DUBLIN (AFP) - Irish low-cost airline Ryanair (Dublin: RY4.IR - news) , reporting a surge in first half profit, on Monday threatened to cancel or delay orders for 200 planes from US aircraft manufacturer Boeing (NYSE: BA - news) unless it gets a better deal.
The carrier also warned that despite its positive performance in the April to September period, the first half of its financial year, falling fares would mean losses in the second half.
Ryanair chief executive Michael O'Leary said in a statement that "little progress" had been made in talks with Boeing on an order for 200 planes to be delivered between 2013 and 2016.
"We won't continue these discussions indefinitely and have signalled to Boeing that if they are not completed by the year end, then Ryanair will end its relationship with Boeing and confirmn a series of order deferrals or cancellations," he said.
"We see no point in continuing to grow rapidly in a declining yield environment where our main aircraft partner is unwilling to play its part in our cost reduction programme by passing on some of the enormous savings which Boeing has enjoyed both from suppliers and more efficient manufacturing in recent years."
He added that money not spent on the new Boeing planes could be distributed to shareholders.
Ryanair exclusively flies Boeing 737 series aircraft.
O'Leary described market conditions in Ireland and Europe as "difficult," with the effect of weak consumer confidence exacerbated by "misguided" tourist taxes in Britain and Ireland "levied on air passengers but not on competing ferry or train journeys."
He urged the British and Irish governments "to scrap these stupid taxes and reduce airport charges," warning that Britain faced a nearly 10 percent decline air traffic and Ireland a 15 percent fall.
Net profit at Ryanair shot up 80 percent to 387 million euros (570.8 million dollars) in April-September compared with the same period a year earlier, the airline said in a statement.
"Ryanair's ability to grow both traffic and profits during the half year is a testament to the strength of Ryanair?s lowest fare model and our relentless cost discipline," Leary said in the statement.
"However these results are heavily distorted by a 42 percent fall in fuel costs which has masked a significant 17 percent decline in average fares.
"We expect average fares to decline by up to 20 percent during quarters three and four which will result in both these quarters being loss-making."
Despite the expected losses, O'Leary said the forecast for the full year was "substantially profitable, at a time when many of our competitors are losing money, consolidating or going bust."
O'Leary had some crisp advice for British Airways (LSE: BAY.L - news) counterpart Willie Walsh who he said had "not been radical enough" in dealing with BA personnel.
"I am shocked to read that crew meals on BA cost 6.5 million pounds a year," he told BBC News, noting that BA wants to cut that cost to 2.5 million.
"Why don't BA crews pay for the whole bloody meal and then save the entire 6.5 million (pounds) and pass it on to hard-pressed BA customers in the form of lower fares? The days of rich fat cat employee deals are over."
O'Leary maintained that at Ryanair "we pay our people very well but they work hard, they buy their own meals, which is what everybody should do, and that's why we are able to pass on cheap airfares ... for the travelling public."
Rynair posted an annual net loss of 169 million euros for its last financial year to March 2009, blaming a 59-percent jump in fuel costs due to record high oil prices as well as a large writedown on its stake in Irish carrier Aer Lingus (LSE: AERL.L - news) .
Revenues dipped two percent to 1.8 billion euros in the first half of the 2009-2010 fiscal year.
But the carrier said it was "well positioned" to benefit from global economic recovery as a result of its growth strategy.
"Ryanair remains ideally positioned to return to substantial profit growth as Europe emerges from this economic downturn," O'Leary said.
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