Ryanair is preparing to cut up to 15 per cent of its 19,000 workforce as it becomes the latest airline to warn that the aviation industry faces a slow recovery from the upheaval wrought by coronavirus.
Europe’s largest low-cost carrier said it expected it would take at least two years for a return to last year’s levels of passenger demand and pricing, as it laid out plans to cut further costs.
Michael O’Leary, Ryanair’s outspoken chief executive, said his outlook on the recovery had changed over the past week in light of the €9bn bailout Air France-KLM had won from the French and Dutch governments, and the state aid Lufthansa is expected to receive.
He said the “whole competitive market has now been completely turned on its head”.
“The weakest airlines going into the crisis — Lufthansa, Air France, KLM, Alitalia — who were going to in normal circumstances have to restructure and retrench are now going to be enormously enriched with this state aid doping. I think what we are facing now is that . . . they’ll be able to make life very difficult for the well-run airlines like ourselves, BA and easyJet.”
Mr O’Leary said Ryanair had to respond by downsizing the airline for the next 12 months. “Unless we have materially lower costs for the next 12-24 months, we won’t be able to operate successfully in a market where air fares are going to be materially lower.”
Ryanair intends to axe as many as 3,000 pilot and cabin crew jobs, and introduce pay cuts of up to 20 per cent as well as close a number of aircraft bases around Europe until air travel recovers. Mr O’Leary will extend his 50 per cent pay cut for the remainder of the financial year to March 2021.
He said it probably should be considering job cuts of up a third of its workforce, and could not rule out further reductions later, but said it was attempting to preserve jobs.
Ryanair’s comments come as any optimism over a speedy recovery for the industry is evaporating, forcing carriers to move from furloughing workers to making redundancies.
On Tuesday, British Airways revealed plans to axe almost 30 per cent of its 42,000-strong workforce after its parent company IAG warned that it could take several years to return to 2019 traffic levels. SAS, the Scandinavian airline, said it would permanently cut half — 5,000 — of its staff.
Ryanair on Friday said it expected to carry no more than 50 per cent of its original traffic target of 44.6m passengers between July and September. For the full year, ending March 2021, it is forecasting fewer than 100m passengers — 35 per cent below its original target of 154m.
In April, May and June, it expects to carry just 150,000 passengers — 99.5 per cent short of its previous target of 42.4m passengers.
The carrier said it was also reviewing its growth plans and aircraft orders, adding that it was in “active negotiations” with both Boeing and Laudamotion’s A320 lessors to cut the number of planned aircraft deliveries over the next 24 months.
The market update comes just a week after Mr O’Leary gave a bullish outlook for a recovery in air travel, outlining plans for the airline to resume 80 per cent of flights by September, provided that flying in Europe could restart from early July. However, he admitted that these planes would have low load factors.
On Friday, Mr O’Leary said there was still a chance Ryanair could reach 2019 traffic volumes by next summer but said it would take until 2022 for 2019 pricing levels to return.
He confirmed Ryanair had also filed a legal complaint to the European Commission over its state aid concerns, and said it would launch legal action by the end of the month.