News | Airlines

Low budget airline price war

2008-07-29

Despite an 85 per cent fall in profits in the first quarter of 2008, Ryan Air surprised the market and consumers alike this week when maverick boss Michael O'Leary announced a price cutting strategy, in the face of rising oil prices and a global economic downturn.

Meanwhile, British Airways warned fares will go up by four per cent and is planning to axe five per cent of its winter flights. Short-haul and domestic flights from Gatwick and Heathrow to regional airports will be most at risk of the axe when BA announces its own first quarter results at the beginning of August.

O'Leary said: "We believe our average fares for the year may fall by as much as five per cent if European air fares plunge this winter. Ryanair will lead this downward pricing at a time when most of our competitors are hoping to raise fares and fuel surcharges. We will continue to absorb higher oil costs, even if it means short-term losses."

Rising oil prices, which averaged $117 a barrel in the first quarter of 2008 compared with $61 a barrel in the same period last year, is responsible for Ryanair's profits dropping to £16million. It faces losses of up to £47.3million this year compared with the record £378million profit last year if oil prices stay high.
Despite the promise of ever cheaper flights, the no-frills airline operator announced it is axeing 14 per cent of its winter flights from Stansted airport . Ryanair's weekly flights will be cut from more than 1,850 to just under 1,600. It is also cutting flights from its Dublin base by 12 per cent this winter and expects to ground just over 10 per cent of its fleet.