Ryanair may change growth strategy

Ryanair may change growth strategy

Ryanair has revealed it is considering easing back on its decade-long expansion as it struggles to keep a lid on operating costs while maintaining its low fares. More specifically Ryanair is looking for a better deal on new aircraft from Boeing.

Ryanair has reported a 35 percent jump in net profits to 250.5 million euros, or $370 million, for the three months to Sept. 30, thanks to a 42 percent drop in oil prices from a year earlier. The reduced fuel bill helped to mask a steep 17 percent decline in average fares for the period, which meant revenue dropped by almost 4 percent to 992 million euros.

Ryaniar warned investors that it plans to cut average fares by about 20% in the next six months, which would mean it would make a loss for the second half of the year. But it maintained its forecast for profits in the full year.

And the company has said that if it can’t sign a deal with Boeing for 200 planes by the end of the year, it will return surplus cash to shareholders as dividends. 

Michael O’Leary has said talks with Boeing on ordering the aircraft for a 2013-16 delivery have not progressed much, adding it could end its traditional relationship with the U.S. aircraft maker.

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“We see no point in continuing to grow rapidly in a declining yield environment, where our main aircraft partner is unwilling to play its part in our cost reduction programme,” the chief executive said.

“We won’t continue these discussions indefinitely and have signalled to Boeing that if they are not completed before the year end, then Ryanair will end its relationship with Boeing and confirm a series of order deferrals and cancellations”.

Ryanair is running out of tools for pushing costs lower under its own steam so they are looking to apply public pressure on governments and airports to lower taxes and landing fees, as well as cutting him a better deal on new planes.