Ryanair Holdings Plc is planning to rekindle growth after the coronavirus crisis by negotiating incentives with traffic-starved airports and betting on the return of Boeing Co.’s beleaguered 737 Max.
Europe’s largest low-cost carrier is in talks with airports in Germany, Austria, Italy, Spain and Portugal that are facing “severe cuts” in capacity as the Covid-19 pandemic batters air travel, Chief Executive Officer Michael O’Leary said in an interview Tuesday. The discussions involve “expanding our growing traffic in their airports over the next 18 months,” he said.
“That’s very much why we want to go ahead and take delivery of the Max,” O’Leary said. “Clearly there’s going to be a huge drop in traffic in 2020, but we think in 2021, there’ll be a lot of growth opportunities there where airports will be offering significant incentives.”
The CEO is planning Ryanair’s long-term recovery as the airline prepares to face off against rivals fortified by government assistance. Ryanair, which got a 600 million-pound ($740 million) loan backed by the U.K. for virus-stricken companies, has railed against heftier aid packages tailor-made for flag carriers such as Air France-KLM and Alitalia. The latest example is Germany’s 9 billion-euro ($9.8 billion) rescue of Deutsche Lufthansa AG, announced Monday.
The Lufthansa bailout will encourage the carrier to engage in below-cost selling and make it harder for airlines without state aid to compete, O’Leary said. The European Commission’s insistence that Lufthansa give up slots in Frankfurt and Munich won’t help, because the company is unlikely to relinquish valuable early morning or late evening slots and instead is likely to give up “the four o’clock on a Friday or a 7 a.m. on a Sunday.”
Ryanair, with about 4.1 billion euros in cash, is banking on the Max to add capacity when air travel rebounds. The shares are down 19% this year, making it the third-best performer in the hard-hit Bloomberg World Airlines Index.
O’Leary said he expects Boeing’s best-selling plane to return to service in North America by late September or early October, with certification of the higher capacity Max 200 variant soon after the similar Max 8. Ryanair expects its Max jets “this side of Christmas,” O’Leary told Bloomberg Television.
“Ryanair is one of the few airlines that actually wants to take those aircraft deliveries,” he said.
The Dublin-based carrier has 135 Max jets on order with 75 options. O’Leary said in February that he’s weighing the purchase of a larger version as well. The Max has been grounded for more than a year following two fatal crashes, and Boeing now expects the model to return to service in the third quarter of 2020.
Ryanair is also keen to continue operating Airbus SE A320 jets at its Laudamotion unit, O’Leary said. Last week, Lauda said it would close its Vienna base after failing to agree to a deal with unions. The Lauda A320 jets are on leases of four to five years, and O’Leary threatened to shift the fleet to Boeing when they expire unless Airbus offers a compelling deal.
O’Leary has previously sought to pit the two planemakers against each other to get good deals. Before the crisis hit, the Ryanair chief had said he would consider buying more Airbus jets at the right price. That was when the Toulouse, France-based manufacturer held a record order backlog and had no need to give discounts.
Ryanair, which has been operating less than 1% of its schedule, plans to resume flying in July with almost 1,000 flights a day. While the carrier sees plenty of rivals at risk of going bust, O’Leary says he’s sworn off acquisitions after his experience with Lauda.
“I would never want to repeat the experience or the amount of time we’ve wasted trying to restructure at Laudamotion,” said O’Leary. “Laudamotion will be the last airline we’ll ever acquire.”