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Ryanair Withholds Management Pay to Offset Rising Fuel Prices

Posted on: Friday, 28 March 2008, 06:00 CDT

Budget fare airline Ryanair is planning to implement certain cost-cutting measures including an executive pay freeze, aimed at reducing the company's expenditures by E400 million, following the rise in fuel prices.

The Dublin-based airline is reportedly reviewing all its expenditures and has withheld the salaries of over 30 senior management executives, till the time the oil prices reduce. However, the pay freeze will amount to a few million euros of the target set by the company, which is why the airline is also looking at other cost-cutting options such as airport and handling costs, staff costs and other operating expenses.

Ryanair, which is claimed to have the lowest non-fuel cost base of the major European budget airlines, has earlier faced problems with its earnings because of the limited hedging cover it has when compared to other European airlines. The airline has grounded some of the planes based at the Stansted airport in London, as an additional measure to cut airport-handling costs.

The airline's current fuel-hedging contracts, which supply oil at the rate of $68 per barrel, expire on April 1, 2008. Ryanair reportedly has 10% of the winter third-quarter fuel needs hedged at the rate of $70 per barrel, for the year 2009.

Michael O'Leary, CEO of Ryanair, has said that the company is likely to start fuel hedging again at $80 per barrel. The company also said that its net profit for the next financial year is likely to fall by 50% because of the pressure on ticket prices and decreasing demand, in addition to the rising fuel prices.

Source: Datamonitor

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