With oil prices at over $100 a barrel, Ryanair is facing a serious threat to its profit margins. But chief executive Michael O’Leary is apparently so keen not to pass on higher fuel costs to passengers that he’s going on a major cost-cutting drive – and he’s starting with his own senior management team. The 30-odd people at the top of the organisation will not get any kind of pay rise this year, unless the price of fuel drops and the airline’s margins start to recover.
Chances are that most of the airline industry will pass these fuel price hikes back on to passengers as additional charges. But O’Leary’s insisting that Ryanair will continue to guarantee the lowest fares and no surcharges on all of its routes – so it’s going to have find the cost savings elsewhere. He suggested ‘airport and handling costs, staff costs and other operating expenses’ will all be trimmed down to the bare minimum.
All very admirable, but it’s a bit hard to believe that Ryanair can chop its airport costs and operating expenses down any further than it has already. After all, it’s shot to prominence by running a tighter ship than its competitors, which is exactly why it’s been able to undercut them on fares. Its level of airport and in-flight service is not exactly the last word in luxury as it is. If it trims its cost base any further, it might end up having to get some of the passengers to fly the plane and serve the drinks.
O’Leary said it was ‘appropriate that Ryanair’s senior management lead this cost reduction programme by example’ – but we just hope his senior managers agree. After all, he spends most of his time offending other airlines, regulators and even senior statesmen – the last thing he needs is to lose any friends on his own side...