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O'Leary Wants Four More Years As Ryanair Profits Surge Ahead

Posted on: Tuesday, 8 November 2005, 06:00 CST

By Michael Harrison Business Editor

Michael O'Leary, the chief executive of Ryanair, yesterday committed himself to the no-frills airline for a further three to four years at least as it reported record first-half profits despite the surge in fuel prices.

Mr O'Leary, who has run the Irish carrier since 1994, said it would take that long to sort out problems at its two biggest bases " Dublin airport and Stansted, where Ryanair is in dispute with BAA over proposals to spend up to pounds 4bn on a new runway and associated facilities.

He said that unless Ryanair could come to some agreement with BAA over the cost of the Stansted expansion " the airline thinks the new runway could be built for pounds 400m-pounds 600m " he would seriously consider bypassing BAA by checking in passengers outside the airport and bussing them direct to the runway.

The airline, which reported a 22 per cent rise in pre-tax profits to EUR269.5m (pounds 182.3m) for the six months to the end of September, will carry 35 million passengers this year, making it the biggest international scheduled carrier in the world. It plans to double in size and profitability over the next five years, flying 70 million passengers by 2012 from 30 European bases compared with 15 at present.

Mr O'Leary, 44, had always said he would re-consider his position when he achieved his target of overtaking Lufthansa as Europe's biggest carrier. Yesterday he said: 'I have no plans to move on at the moment but some time in the next four to five years, yes, it will be time.'

He said that by then Ryanair would be one of only four airlines that mattered in Europe " the others being Air France, British Airways and Lufthansa " and would need to have a different relationship with institutions such as the European Commission that befitted its size and importance.

'The airline will have to become more professional in the way it approaches decision making and more sensitive to environmental whingeing and the goon platoons and that certainly won't be me,' he said.

He was speaking as Ryanair forecast that yields " or average fares " would fall by 5 to 10 per cent in the fourth quarter after rising 3 per cent in the first half of the year. 'We continue to remain cautious in our outlook for the remainder of the fiscal year,' Mr O'Leary said. 'This winter we expect there to be continued intense competition and there will be fewer low-fare carriers in the market as higher fuel prices force more carriers out of the industry.' Ryanair shares slipped 3 per cent to EUR6.79.

Ryanair's fuel costs rose 108 per cent in the first half to EUR237m, resulting in an 8 per cent increase in unit costs. Excluding fuel, unit costs were down 7 per cent. Ryanair's fuel purchases were unhedged for most of the period but for the remainder of the year it has fixed 90 per cent of its requirements at $49 a barrel.

Ancillary revenues from services such as on-board sales, car hire and travel insurance increased by 40 per cent, accounting for 13 per cent of the EUR946m in total income the airline generated. Mr O'Leary said Ryanair planned a big push to increase revenues from hotel bookings.

The airline is in talks with two budget hotel operators about developing new hotels next to airports served by Ryanair. In return for guaranteeing customers, Ryanair would take a cut of the room tariffs. As an example, Mr O'Leary cited its base at Barcelona Girona, where passenger numbers are forecast to double to 10 million in the next five years. He said it had two hotels but needed a further three.

OUTLOOK, PAGE 63

Source: Independent, The; London (UK)

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