European no-frills airline Ryanair on Tuesday said soaring oil prices might drive up fuel costs more than predicted but that it could win more customers if rivals stepped up fuel surcharges on tickets.
Chief Executive Michael O'Leary resurrected warnings of a bloodbath amongst European airlines this year if oil prices remained at current levels but stuck by Ryanair's previous guidance for improved earnings this year.
"If it stays at USD$60 (per barrel) through the remainder of the summer and the winter, our fuel bill will be higher than originally predicted," O'Leary told reporters. "It will also have a much higher impact on our competitors."
Oil prices surged to a record high above USD$59 a barrel on Monday, driving down shares in most European airlines.
Ryanair shares have fallen 5 percent so far this month but remain well above lows of EUR4.50 a year ago.
Ryanair is unhedged until September, when it has increased hedging for up to 90 percent of its fuel needs at USD$47 per barrel.
Every one dollar rise in fuel above USD$47 adds about EUR5 million (USD$6 million) to Ryanair's costs. Goodbody Stockbrokers said in a note that current fuel prices would add EUR60 million to Ryanair's expenses this year.
However, O'Leary predicted that rising fuel costs would lead to further increases in fuel surcharges by full-service airlines, sending more passengers to low-cost airlines, which do not impose fuel levies.
"The bloodbath in Europe, it is continuing and will get worse at USD$60 a barrel," he told reporters. "It is not pretty out there. If oil stays at USD$60 per barrel over the next 12 months, most of Europe's airlines will show enormous losses."
Analysts say O'Leary's previous warnings of a bloodbath failed to materialize, despite the collapse of several European airlines, as ticket prices stabilized. However, fuel costs have continued to hamper most carriers.
Ryanair announced new routes to France, Lithuania and Poland on Tuesday. O'Leary said 78 percent of its traffic growth would come from new routes in western Europe this year. The carrier will announce two new bases shortly.
