MARCH 2020 PAGE 29 THE FLYING COLUMN


Michael O;Leary at the Airlines4Europe conference in Brussels with Carsten Spohr of Lufthansa Willie Walsh CEO of IAG, Ben Smith of Air France THE GOSPEL ACCORDING TO MICHAEL


CORONAVIRUS Our sense of this is that’s people will


generally put off travelling unless necessary for the next three of four weeks. For the next two weeks we are heavily booked, no cancellations, so we won’t be that affected, but there will be a higher no show ratio. I think, after that, things will have bot- tomed out at that point in time. People will be fed up following the outbreaks. We don’t yet see any diminution in the bookings over the Easter period. Nor do we see a demand for cancellations or refunds over that period. We think there is a reasonable prospect that Easter will see some return to nor- mality. If that takes place we will all be launching seat sales through May, the first half of June and whatever length it takes.


BOEING 737 MAX Once we were pretty sure we were


sure we were not going to get it this side of June we deferred. Our first de- livery now is September.


I think the place will return to service in June July in America. I think in Europe it will be slightly later, in Sep- tember, October. The challenge for us now is there is 20 of the Max aircraft for Ryanair already built and sitting on the ramp in Seattle. They will get delivered really quickly, I am saying October November. The challenge is will Boeing spool up the production line and deliver us another 30 aircraft for the summer of 2020-21. I am more concerned now, not that we will get the first aircraft in the au- tumn, because we will, but will we get enough aircraft to be able to go back to 50 aircraft delivery for the summer of 2021. Because of aircraft sales and lease returns, will still only give us net 25-30 aircraft for summer of 2021. Over a two year period we are going to have very modest traffic growth.


BOEING ORDERS Boe-


ing tell us that the leasing companies are cancelling orders. They don’t have the cash flow for them. Customers are abandoning orders. One of the upsides


of the Coronavirus is that you will see another number of airlines fail. Some of the crazy big orders that were never going to be delivered like the Indonesia Lion Air order with Airbus and Boeing, the Norwegian order, will collapse, and that may create some movement on the order book. Airbus themselves are delivering aircraft three or six months behind schedule so they need some of those to be cancelled just to catch up with their orders.


COMPENSATION There


is outline agreement in principle on compensation, but the computations cannot be done until we get the de- liveries and we have some reasonable confidence as to when the first of the aircraft is going to be delivered. There are a number of discussions going on. There is a compensation dis- cussion. There is a pricing discussion going on because clearly these aircraft have suffered a reputational risk, we need to do the pricing, and we are also involved in a new order discussion, but they don’t have the head space to deal with that at the moment.


GERMANY The target of


14pc in Germany is not gone. It was always going to be flexed. The diffi- culty we have had this year, because we are short of aircraft, we have closed the base in Hamburg, closed Bremen, closed Nuremberg, We would like to reopen those straightaway as soon as we have available aircraft. Stuttgart is still strong. Berlin we are growing. Germany is still strong. Germany is not a market at the moment I would like to have mad cap expansion in. Lufthansa themselves, they bought Air Berlin last year, instead of taking out about 30pc or 40pc of the capacity they flew the entire capacity, they had this kind of paranoia that the rest of Europe was going to arrive in and plunge airport slots, nobody cares about Germany, they are taking out significant capacity in Eurowings we have seen their capacity cut by 12- 15pc. A lot of the capacity cuts they announced late on Friday evening are


also going to be focussed on Eurow- ings, Germany will settle down pretty quickly in the next year or two. It is one of the least profitable markets, so most of our growth this year is going into Poland, Romania where we are seeing very profitable growth, those markets where we are chasing Wizz further and further east. Dublin Munich was ended because of aircraft availability, and also costs in Munich are nuts. It is mad.


STRIKES & EU261 The


London decision went for us. It is insane to say that an airline must be re- sponsible for strikes, because if the air- line was in control of this there would not be a strike. Unions can call a strike to disrupt your business, if they can disrupt your business and force you to pay millions of euro in compensation when it is clearly outside of the air- line’s control, I find it very hard to see how we won‘t win that ultimately on appeal. No airline will willingly have a strike. We do everything in our power to actually buy off the strikes. Our English strikes by BALPA in August, not one flight was cancelled. If we can do that, and we can manage our way through it. Less than 25pc of the Irish pilots went on strike, and we had to cancel less than 20 flights on any given day. When we can make those effort to find our way around strikes. If we have to cancel some flights it is clearly not within our control. We only do it as a last alternative.


PROFIT Coronavrius won’t have any effect on our March year end


results this year because most of that is the bag already. First quarter next year will get hit. Passenger numbers will be down 10, 15pc in to April, May, June, and if passenger numbers are not down 10pc yield will be down because we will all be dumping, seat sales, getting everyone moving again once everyone is confident to start moving down. March does not run a profit. Back end of March might into April. April yes, but that is heavily driven by Easter. The reality is it, does cost us money.


BOOKINGS On the first of every month we would have 80-65-


35 visibility. On March 1st we will typically be 80-85pc booked. We would be 60-65pc booked for April. We would be down at about 30-35pc booked for May. For the last week in February we saw a sharp decline. We were supposed to take 3.5m bookings a week. Last week we took 2.5m book- ings. So we are down 20pc. I think it will accelerate this week, partly because we took out 2,500 flights, we will probably be down 30pc this week. Thereafter, a lot depends on the media coverage and what government do.


MAX PASSENGERS We will have to have customer confi-


dence-building measures say for the first six months. We don’t want people to feel they’re trapped on a MAX. If you don’t want to go on it, fine. Off you go, take off the bag, and you can have a full refund. The offer would only be available to those who turn up at the airport. After all, if the airline is unable to advertise if a flight is oper- ated by a MAX in advance, passengers wouldn’t know they were on a MAX until they arrived at the gate and saw the serrated engines and split wingtips.


BIGGEST ISSUE With- out a doubt the biggest issue we face


at the moment is national governments taxing flights, not as an environmental measure just tax grabs. We have done so much in the last twenty years to lower the cost of air travel. Now you have governments going the other way. Let’s tax the life out of it. The other is the single European sky. ATC is a shambles. We would eliminate 90pc of our flight delays in an entire year, more than 90pc of our Eu261 payments which last year in our case were €160m, if you eliminated delays, if you closed down Karlsruhe and stopped the French air traffic control- lers going on strike. It is nuts. Twenty years later, despite all the promises, the EU delivered nothing.


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