Ryanair eyes fresh phase of growth

Ryanair has ambitious plans to increase the number of passengers flying with Europe’s leading low-cost airline each year from 70m to up to 130m over the next decade, by buying as many as 300 aircraft.

Michael O’Leary, Ryanair’s chief executive, told the Financial Times he was looking to take a large delivery of aircraft between 2015 and 2021, and was in talks with US, Chinese and Russian manufacturers.

His comments are his most explicit yet about taking the Irish airline on a second phase of growth following rapid expansion over the past decade.

Mr O’Leary insisted he would only buy aircraft at “cheap prices”, but one analyst questioned whether Ryanair could strike a cut-price deal with Boeing or Airbus, the established commercial aircraft makers. Another analyst said further expansion could hurt profitability at the airline.

Ryanair has an all-Boeing fleet, and Mr O’Leary acknowledged it faced increased operating costs if it bought aircraft from a different manufacturer.

Ryanair is talking to three manufacturers – Boeing of the US, China’s Comac and Russia’s Irkut – about a deal to buy 200-300 narrow-body aircraft from one of them.

Such a deal would enlarge Ryanair’s fleet from 300 to 500 – some new jets would replace older ones – and enable the airline to increase passenger numbers. “I would like to grow to 120m, 130m passengers,” said Mr O’Leary. In 2010-11, 72.1m passengers flew with Ryanair.

At 130m passengers, Ryanair would consolidate its position as one of the world’s largest airlines. Lufthansa, Europe’s largest airline by revenue, flew 91m passengers in 2010. Southwest Airlines, the US low-cost carrier, flew 88m passengers in 2010.

Mr O’Leary said demand for low-cost air travel in the deteriorating economic environment meant Ryanair could continue to increase market share on European short-haul routes at the expense of flag carriers including Lufthansa and British Airways.

Ryanair’s expansion in recent years has focused on Italy and Spain, and Mr O’Leary said the airline now had big growth opportunities in Scandinavia and eastern Europe.

He outlined the case for deploying 50 aircraft in Scandinavia and 100 in eastern Europe.

Mr O’Leary added that Ryanair could pay two more special dividends before it placed a new aircraft order.

Ryanair paid a maiden dividend worth €500m last year, and is considering a similar payment to shareholders in 2012-13.

Mr O’Leary said a third special dividend might possible in 2014-15 if Ryanair had not finalised an aircraft order by then, but he ruled out the company making an annual pay-out to shareholders.