Ryanair chief executive Michael O’Leary predicts fares will not rise in the short-term because of spare capacity in the market.
And he said the scrapping of Air Passenger Duty would be the best thing the UK government could do to help the aviation sector recover from the Covid-19 crisis.
Speaking to the parliamentary transport select committee on Wednesday, he said he can’t see fares increasing in the next 12 months because “there is so much spare capacity”.
“We will be dumping and lowering prices for the next six or 12 months to get people flying again, to encourage people, but we will have much higher costs,” he told the transport select committee.
In answer to a question about what is needed to encourage consumers back in the air, he said that feedback from customers showed they want low prices, adding: “They will get those, certainly for the first six or nine months of recovery because our forward bookings are so much lower than they have been historically.”
He said the “one lever” the government has at its disposal to help aviation to recover is Air Passenger Duty but it has made “no effort to reduce that or abandon it altogether”.
“APD is the most egregious tax on air travel,” he said. “It hits the poorest people hardest.”
He pointed out that APD is levied twice on domestic trips within the UK and limits the ability of airlines to operate routes from regional airports.
Ryanair made an annual profit of about €1 billion before the pandemic but the consensus is that it will report a loss of €850 million as a result of the crisis – a swing of almost €2 billion, he told MPs.
Annual passenger numbers have tumbled from about 150 million before the pandemic to an estimated 27 million in the year to the end of March.
He hopes the airline can operate about 60-70% of normal traffic volumes this summer, rising to 70-80% in the winter.
The airline will take from March 2022 to March 2023 to return to profitability, he said.
He admitted furlough has helped cabin crew and pilots but otherwise, government support for the sector has been “lamentable”.
Tim Hawkins, chief of staff at Manchester Airports Group – which runs Manchester, Stansted and East Midlands airports – described the pandemic as an “incredible ordeal”.
The airports usually handle 62 million passengers a year but he expects numbers to fall to about 10% of that figure for the current 12-month period.
He said turnover has “fallen off a cliff”, dropping from £850 million to about 15% of that figure, but the airports still have high fixed costs.
“We do expect to see a recovery; we will see the business back to normal over the next three years,” he said.
“It will take until 2024 for that recovery.”
Simon Calder, senior travel editor at The Independent, said, however, fares would “undoubtedly” rise.
“It is not going to be a direct reaction but during the restart we will see a lot less capacity offered,” he told the committee.
“That will have the beneficial effect…if demand does return at scale, of keeping prices high.
“We will be paying more. We will have less choice.”
He also said airports will look at the issue of charges as they have high fixed costs.
“We have had this wonderful, virtuous falling over time of fares and expanding of opportunities,” he said.
“That is most certainly going into reverse.”
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