HomeBusinessRyanair launches airlines price war as losses hit £375m

Ryanair launches airlines price war as losses hit £375m


Ryanair launches airlines price war: Boss Michael O’Leary says budget airline is still struggling to fill planes as losses hit £375m


Ryanair has kicked off a price war as it battles to win back customers after Omicron hammered business over Christmas.

Boss Michael O’Leary said demand has picked up since travel restrictions lifted – but the no-frills airline would have to slash ticket prices to fill planes in the coming months.

The strategy follows a difficult quarter that saw many travellers cancel or rearrange flights when Omicron emerged. 

Strategy: Michael O’Leary (pictured) has turned up the heat on rivals by announcing Ryanair would have to slash ticket prices to fill planes in the coming months

O’Leary blamed ‘media hysteria’ over the variant after passenger numbers fell well below expectations in December and January.

Analysts warned that there could be a ‘major battle ahead’ among budget airlines ‘desperate to secure ticket sales’.

But some airlines may be reluctant to follow Ryanair’s lead as they seek to rebuild profits in the wake of Covid.

This year – particularly the peak summer season – will be a crucial opportunity for carriers and holiday companies to win bookings from families eager to go abroad.

O’Leary said Ryanair would require ‘significant price stimulation’ as the Irish carrier revealed it lost £80million in the last three months of 2021.

It warned that losses for the full year to the end of March could spiral to as much as £375million – some £210million more than previously expected. 

Suggesting that there could be more disruption ahead, O’Leary said: ‘This out-turn is hugely sensitive to any further positive or negative Covid news flow and so we would caution all shareholders to expect further Covid disruptions before we here in Europe and the rest of the world can finally declare that the Covid crisis is behind us.’

Ryanair has spent decades finding ways to strip back the basic costs of tickets and charge customers for extras to increase its revenues. 

O’Leary pioneered this strategy, modelled on one by US airline Southwest, in the 1990s.

Ryanair said these earnings were 8 per cent higher in the third quarter at around £18 a customer as people spent more for priority booking and reserved seating.

Rivals including Easyjet have already ramped up their extra charges to help recover from Covid, but a price war will create an added burden.

Victoria Scholar, head of investment at Interactive Investor, said: ‘Ryanair’s decision to slash prices to stimulate demand will no doubt put pressure on its rivals like Easyjet, Jet2 and Wizz Air to follow suit.’

Yesterday several of Ryanair’s rivals had offers or sales on their website. Wizz Air was offering 2m seats with a 20 per cent discount, while Jet2 was giving 10 per cent off flights from a range of airports.

On the Beach said it would allow customers free airport lounge access and fast-track security. 

Tui had a range of ‘Treat Yourself This Payday’ discounts that took between £100 and £350 off bookings depending on their size. Easyjet had 800,000 seats available from £19.99 until today.

Martyn Sumners, executive director of the Association for Independent Travel Operators, said a summer price war would be in ‘no-one’s interests’ after the industry was ravaged by Covid.

Advertisement



Source link

Must Read