Ryanair says ticket prices will have to rise
The CEO of Ryanair, Europe’s biggest airline by passenger numbers, says the era of super cheap air travel is over.
“I don’t think there are going to be 10 euro [$10.33] flights anymore because oil prices are significantly higher as a result of the Russian invasion of Ukraine,” Michael O’Leary told BBC Radio 4′s Today program on Thursday.
Ryanair’s average fare was 40 euros last year, equivalent to about £34, but O’Leary said that will now need to increase.
“We think that 40 euros needs to edge up towards maybe 50 euros over the next five years. So the £35 average fare in the U.K. will rise to maybe £42 or £43,” he said.
Ryanair is known for its low-price flash sales, but these prices are now thought to be unsustainable in the current climate, according to O’Leary.
“There’s no doubt that at the lower end of the marketplace, our really cheap promotional fares, the one euro fares, the 99 cent fares, even the 9.99 fares, I think you will not see those fares for the next number of years.”
Ryanair is not planning on hiking prices across its offerings, however.
“Ryanair will still have millions of seats available at 19.99, 24.99 and 29.99,” O’Leary said. “Now that will still be a fraction of the high fares that BA and our other competitors are charging.”
The news is not the start of a more widespread end to budget flying as we currently know it, according to John Strickland, director of JLS Consulting.
“The relative pricing level may change modestly for lead in fares but as airlines, low cost carriers in particular, generate increasing revenues from ancillary sources (non-ticket), they can still use low price to entice bookings whilst maximising these other opportunities,” he said.
Ryanair declined to comment further when contacted by CNBC.
The airline has said it is currently operating business as usual with “no plans to cap passenger numbers,” in what has been a chaotic few months for airports and carriers.
Airlines including BA, easyJet, Lufthansa and KLM have made adjustments to their schedules due to strikes and staff shortages.
O’Leary’s ticket comments come shortly after Ryanair reported profits for the June quarter beat estimates.
Ryanair is being careful in its approach, CFO Neil Sorahan said on CNBC’s “Squawk Box” on July 25.
“We remain cautious as to what may happen with Ukraine. If it remains contained within Ukraine then I think we’ll continue to see central and eastern Europe bookings strongly for the remainder of the year,” Sorahan said.
“But there are a lot of unknowns with very volatile prices and I think it’s right to be cautious.”
Hannah Ward-Glenton www.cnbc.com