Michael O’Leary has said he cannot rule out making some of Ryanair’s 17,500 staff redundant if the Boeing 737 Max stays grounded for longer than expected while investigations continue into two fatal crashes involving the aircraft.
Speaking as the low-cost airline’s first-quarter profits slumped by 24%, the carrier’s chief executive bemoaned the impact of delays in the return to service of the 737 Max, a key component of Ryanair’s strategy to arrest the decline in its financial performance.
Ryanair has 135 of the 737 Max models on order, with 58 due for delivery by summer 2020, but the airline will not accept them until regulators have declared the plane safe to fly.
O’Leary warned that Ryanair may not have any of the planes ready by next summer unless Boeing “gets their shit together” in making upgrades required by regulators.
The grounding of the global fleet of 737 Max aircraft has already taken its toll on Ryanair, forcing the airline to halve growth targets for next year as it scrapped 30,000 planned flights and warned it could close bases at airports.
“We would not rule out redundancies and job losses, which will be inevitable if these Max delays are as presently envisaged or get worse,” O’Leary said.
At least one Boeing 737 Max that was due to be delivered to Ryanair has had the name Max dropped from the livery, fuelling speculation that the manufacturer and airlines will seek to rebrand the troubled plane.
The airline’s 24% drop in quarterly profits was compounded by price wars in several European markets. It said average fares at Europe’s largest low-cost carrier were likely to fall by 6% over the crucial summer period compared with last year, as airlines cut prices to stimulate demand, particularly in Germany and the UK.
O’Leary pointed to competition driving down prices in Germany, as well as reduced spending in the UK as Brexit uncertainty hits consumer confidence.
“We are cautious on pricing into the winter,” he said. “Brexit and the risk of a hard Brexit has materially increased with the new government in the UK.”
The decline in fares pushed pretax profit down to €262m (£236m) for the three months to 30 June, compared with €345m in the same period of 2018.
But the company stuck to its annual profit target of between €750m and €950m as passengers continued to spend on onboard extras, which include food, perfume and scratchcards.
Shares in the airline fell by 0.7% by the end of the day, having almost halved in value in two years as it grapples with overcapacity, repeated strikes by disgruntled pilots and cabin crew, Brexit uncertainty and the 737 delays.
O’Leary lashed out at unions for threatening new strikes, with action planned by pilots in the UK and Ireland, as well as cabin crew in Portugal. “It seems to us that even by the standards of some of these trade unions, this is chronically ill-timed and ill-judged,” he said, adding that it could coincide with the period in which the company would be announcing cuts related to the Max grounding.