Ryanair Group CEO Michael O’Leary thinks the UK brought its travel staffing issues on itself with an “inflexible” labor market since the country left the EU in 2020.
While the discounter itself does not face staffing issues, O’Leary said during the airline’s 2022 fiscal year-earnings call on May 16 that there is a shortfall in airport and catering employees across the country. Especially tough spots where the airline flies include Glasgow, Bristol, and Manchester.
“Supplier labor will continue to be an issue,” O’Leary said of the summer, adding that he expects issues to ease within the EU relatively quickly. “The UK will continue to be very challenged. The labor market is very inflexible post Brexit. You can’t bring in young Europeans.”
The UK exited the EU in January 2020 following a vote in 2016. That ended the relatively free movement of labor between countries in the bloc and the UK. The situation did not become acute for the travel industry until restrictions were eased and demand came roaring back this year. British Airways, EasyJet, and the operator of London’s Heathrow Airport have all felt the pinch and taken measures to alleviate issues this summer following overcrowded airports and cancelled flights in April.
O’Leary described the cuts at British Airways as “understandable” and “sensible.” The legacy carrier will cut its schedule at Heathrow by up to 10 percent daily, primarily on routes to Europe where it competes with discounters like Ryanair, through October. “It does play to our business strategy over the next 12 to 15 months,” he said.
Staffing is also a situation at some European airports, O’Leary said. He cited shortages in security staff at the Berlin and Dublin airports as an example. Lufthansa CEO Carsten Spohr has also warned of airport staffing issues this summer.
The situation in the UK comes as demand looks robust for the summer. Ryanair maintains plans to fly roughly 15 percent more capacity during the peak travel period than it did in 2019. In addition, O’Leary said pricing is a “modest single-digit [percentage] above where it was pre-Covid” for the September quarter. Pricing in the June quarter is slightly below levels seen three years ago.
But risks remain. O’Leary expressed the same concerns of a potential disruption to the recovery this summer that he outlined at an industry conference in March. “If there’s any negative news flow either on Covid or on Ukraine or Icelandic volcanic ash, that could fall over again,” he said, adding that the Ryanair team is still “scarred” from the Omicron surge at the beginning of the year.
The risk of a downturn or recession in Europe’s largest economies also looms large for Ryanair. In an April economic outlook for Europe, International Monetary Fund (IMF) Director of the European Department Alfred Kammer said the economies of France, Germany, Italy, and the UK were projected to “barely expand, or even contract for two straight quarters this year.” Russia and Ukraine are also forecast to fall into deep downturns.
“In a recession, the low-cost providers whether it’s Primark, Ikea, Lidl in the supermarkets or Ryanair in air travel will do better,” said O’Leary. “People will fly, but they will trade down from the higher cost providers to Ryanair.”
However, the airline did not provide guidance for its fiscal year that ends in March 2023. O’Leary only said that they anticipate a “modest profit recovery” without providing details. When asked by analysts if this could mean a little over €1 billion ($1 billion) as the airline reported pre-Covid, he said the airline “hopes” this to be the case but given the uncertainty of the outlook it has no certainty.
Ryanair plans to accelerate its growth plans even with the ever present risks to the recovery. The airline has a request for proposals out for up to 50 used Airbus A320 family or Boeing 737 aircraft that would supplement its 737-8200 orderbook through 2025, said O’Leary. The addition of A320s would supplement those Ryanair subsidiary Lauda already operates. There was no update on a potential Ryanair order for the 737-10, and O’Leary repeated his comments about Airbus capturing marketshare from Boeing as the U.S. airframer continues to face issues with its commercial aircraft programs.
Ryanair lost €355 million during the year ending in March. Revenues were down just 1 percent compared with 2019 to €4.8 billion.