Bloomberg Talks
00:02:30 · Michael O'Leary, Michael O'Leary, Tim Stenovec
[00:02:30] S0: I don't think we have much pricing power. [00:02:32] S2: But what's happening within the industry this winter is capacity is being taken out hugely. Like you've seen Valare, Air Baltic are in Chapter 11. There will be other airline casualties in Europe this winter. Even Ryanair, we're only flat capacity year on year this winter. So Air lands are cutting back capacity this winter. I think that will continue into next summer. And with capacity reductions, you're going to see, I think, record increases in airfares in Europe, in the UK from in summer 27 onwards. We have to pay for these. Consumers will finally have to pay for these higher oil prices. We've insulated them for the last 12 months because of our fuel hedging. [00:03:05] S1: So, you know, planning next summer for people's summer holidays, what are they talking about, 20%, 30%? I mean, if. [00:03:10] S2: I was, I would be, my advice to consumers now is book early for next summer because the prices are going to rise significantly. [00:03:16] S0: So the sooner you book, the better. [00:03:17] S2: But, you know, there will still be lots of, Ryanair will still have the lowest fares in every market in which we operate, but there'll be less low fares. And I think there'll be less competition there next summer because more airlines are going to fail. [00:03:28] S1: With the number of, with airlines... Failure being a prospect, will you go looking for acquisitions? [00:03:33] S0: No, no, no.
00:03:33 · Michael O'Leary, Michael O'Leary, Tim Stenovec
[00:03:33] S0: No, no, no. [00:03:34] S2: I mean, we're all organic growth, Steve. So we have 300 MAX 10 aircraft on order. Next year, we take the first 16 MAX 10s. That's enough for us to grow. This year, 214 million. Next year, we do. [00:03:44] S0: About 220 million passengers. [00:03:46] S2: But I think there's no doubt that our profitability is going to take a hit next year if our oil bill increases by 33%. [00:03:53] S1: You mentioned the MAX 10s. There also have been warnings from both Airbus and Boeing about supply chain disruption in their earnings last week as well. As one of Boeing's biggest customers, how worried are you about that, even though you're finally going to get the MAX 10s? [00:04:04] S2: We're not worried because Boeing have confirmed, in fact, our 16 deliveries for next year and the first and the 16 deliveries for 2028 as well are all confirmed. We got in early with our MAX 10 order. We ordered them coming out of COVID. So we got great pricing and great delivery slots. But the fact that the manufacturers are all well behind on their deliveries means, again, capacity in Europe would be very tight for the next four or five years. There's going to be a lot less kind of choice and competition, and prices are going to rise. [00:04:35] S1: So does that hit, then, your growth forecast, if you're expecting.
00:04:35 · Tim Stenovec, Michael O'Leary, Michael O'Leary
[00:04:35] S1: So does that hit, then, your growth forecast, if you're expecting. [00:04:38] S2: Those more today? No, because we have 300 aircraft on order. They'll be delivered between now and 2034, and that will allow us to grow from 214 million passengers this year to 300 and. Just over 300 million passengers by 2034. So Ryanair will be the only airline in Europe still growing, I think, in the next five years. The price gap between us and every other will become wider and wider. But there's no doubt we and all European airlines are facing real challenges into 2027. [00:05:04] S0: But we've been here before. [00:05:04] S2: We were here Gulf War I, Gulf War II, 9-11, when Putin invaded Ukraine. The airline that emerged out of all those crises stronger was Ryanair because we go into them with no debt. Large aircraft, lots of cash on the balance sheet. These are the times when Ryanair does best. [00:05:20] S1: How do you compare this crisis to those other challenges that your industry has faced? [00:05:24] S2: It is as serious as those other challenges. The question is, how long does it continue? I mean, you know, we're all watching the US midterms this week. Does Trump lose the House and the Senate? What effect does that have on the war in Iran and the Hormuz Strait? We believe in the next probably two quarters, we'll see some resolution of the war in the Middle East. We don't believe the Americans or the Iranians want to continue it over the longer term. [00:05:50] S0: Straits for Hormuz will reopen. I think crude prices will come down.
00:05:50 · Michael O'Leary, Michael O'Leary, Tim Stenovec
[00:05:50] S0: Straits for Hormuz will reopen. I think crude prices will come down. [00:05:53] S2: But the crack spread between the difference in crude and jet, that is going to remain elevated, we think, for the next 12 months because of pressure on refineries, and pressure on tankering. So we, the airlines, are facing materially higher oil prices all the way through 2027, and that is going to get passed on in meaningfully higher airfares to consumers. [00:06:11] S1: So what does Ryanair look like in 12 months' time? [00:06:13] S2: I think we look like an airline with about 220 million passengers. I would hope we'll still be significantly profitable. The question is, I just don't know how profitable we'll be next year because we don't know what will be the final outturn on oil prices. I think we'll see oil prices coming down, but not to where we're hedged this year. [00:06:30] S1: In terms of a route network, how much smaller? [00:06:32] S0: The route network won't fundamentally change. [00:06:34] S2: We're seeing a lot of switching capacity away from places like Brussels, France, Italy, Brussels, France, Germany, the high tax economies, and large growth in the load in the non-tax economies now, Sweden, Albania. [00:06:48] S0: Slovakia, regional Italy, Ireland. where there's no tax on aviation. [00:06:53] S2: And I think that would put further pressure on both states and airports to reduce costs. For those states who are abolishing taxes and airports reducing costs, we'll see tremendous growth. States that don't get it, Berlin, Paris, they'll continue to see decline.
00:06:53 · Michael O'Leary, Tim Stenovec, Michael O'Leary
[00:06:53] S2: And I think that would put further pressure on both states and airports to reduce costs. For those states who are abolishing taxes and airports reducing costs, we'll see tremendous growth. States that don't get it, Berlin, Paris, they'll continue to see decline. [00:07:09] S1: Could Ryanair become an acquisition target itself? [00:07:12] S0: I doubt it. We're a public company. There's no reason why. But we would be expensive. I think our market cap. [00:07:18] S2: Today is about $ 20 billion. We plan to double that over the next four or five years. So we'd be an expensive acquisition, but we're a public company. So if somebody wants to show up and make a big offer, I'm sure the board would have to consider it. [00:07:32] S1: You'll take their call if somebody phones you about Ryanair's future? [00:07:35] S2: Well, we'll always take anybody's call about Ryanair's future. But, you know, I'm committed to Ryanair's future, certainly for the next five years. So is the rest of the management team. We think with the delivery of MAX 10s, we have a very exciting future. But it's a future in Europe where there will be less airlines operating. I think Europe is inevitably moving towards four large airline groups, BA, Lufthansa, Air France, KLM and Ryanair. And there's only one airline in that group that is committed to low fare air travel, and it's Ryanair. If we don't grow, everybody else is going to get screwed in Europe in the next five years.
00:07:35 · Michael O'Leary, Tim Stenovec, Michael O'Leary
[00:07:35] S2: Well, we'll always take anybody's call about Ryanair's future. But, you know, I'm committed to Ryanair's future, certainly for the next five years. So is the rest of the management team. We think with the delivery of MAX 10s, we have a very exciting future. But it's a future in Europe where there will be less airlines operating. I think Europe is inevitably moving towards four large airline groups, BA, Lufthansa, Air France, KLM and Ryanair. And there's only one airline in that group that is committed to low fare air travel, and it's Ryanair. If we don't grow, everybody else is going to get screwed in Europe in the next five years. [00:08:05] S1: You had a very public bust up with Elon Musk recently about Starlink. I'm just wondering if you had a chance to make up since. [00:08:10] S0: I have no intention of making up with him. He thinks I'm an idiot. I know he's an idiot. [00:08:16] S2: But, you know, he generated about 30 or 40 million dollars worth of free publicity for Ryanair and our bookings went up for two or three weeks. [00:08:23] S0: So if we can annoy him again, so much the better. [00:08:25] S1: OK, Michael O'Leary, CEO of Ryanair. Thank you very much for joining us in studio this morning.