Ryanair chief executive Michael O’Leary looks set to remain at the head of the carrier up to 2028 after he confirmed he was in talks to extend his contract.
Mr O’Leary said no terms had been discussed but talks had begun. “I think we’d like to have something sorted out in order to tell shareholders, probably before the end of March of next year,” he said. “The reason we’re not doing anything earlier is we have to wait and see if there’s going to be any adverse developments with Covid or with Ukraine this winter.”
Mr O’Leary added the company could commence returns to shareholders by its 2024 fiscal year, once pay had been restored to cabin crew and pilots.
The company held its annual general meeting (agm) in Dublin on Thursday morning. Shareholders raised queries about Ryanair’s fuel hedging policy, growth strategy and the expansion in Italy. However, Ryanair blocked media from attending the meeting, in a last-minute decision. The company did not give a reason for the decision, but Mr O’Leary later apologised for the move.
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All motions were carried at the agm, with Mr O’Leary saying there was no criticism of the bonus scheme. The remuneration report was carried by 98 per cent.
Mr O’Leary signed a five-year contract in early 2019 that cut his annual base pay and maximum bonus in half to €500,000. However, it also included options to buy 10 million Ryanair shares at €11.12 each if its net profit topped €2 billion in any of the years, or if its share price exceeded €21 for a period of 28 days between April of this year and March 2024.
The share price has been under pressure in recent months and is currently about €12.30. Mr O’Leary said the company was unlikely to hit the targets set out under the incentive plan this year, particularly in light of the rising oil prices.
“They remain very challenging targets. We’re certainly not going to get there this year. Who knows what happens next year, the year after,” he said. “We’re all working here hard to boost profitability and to boost the share price but it’s very difficult when you have two black swan events — the Covid pandemic in the last two years, which was the first time since the second World War grounded air travel.
“Then, just as we’re recovering from Covid, we get hammered with the Russian invasion of Ukraine, which is the first land war in Europe since the second World War. I think there’s a reasonable prospect that we will get to profitability and the share price up to our — not just mine, but the other management group — share option targets. But not until we get out of these black swan unprecedented events.”
Mr O’Leary made a €4.16 million pretax profit last week exercising options to buy shares in the carrier and immediately selling the stock on the market. His pay, which was reduced during the pandemic, was reinstated earlier this year.
“We have debt repayments of about €1.5 billion over the next 12 months. Once we get paid on that debt, then I think we will look to see if we have spare cash to return to shareholders,” he said. “We’re going through a period of time to where we are paying down debt and we’re also funding very large capital expenditure: last year €1.5 billion on new aircraft, in the next 12 months €2.5 billion on new aircraft.
“We hope to see some resumption of shareholder returns by the end of FY24, but only if we have already restored everybody’s pay first; pay restoration for pilots and cabin crew ... and management comes first.”
The company was scheduled to take delivery of 21 Boeing aircraft between September and December this year; however, Mr O’Leary said Boeing had only committed to delivering 13 of those, and he was unsure when the remaining eight would be delivered. A delay in the new aircraft could hit Ryanair’s plans for growth, with the company on track to carry 166 million passengers this year. He acknowledged that the recovery was fragile, however, and any negative news on Covid or the ongoing war in Ukraine could derail things in the third or fourth quarter.
Rising oil prices could continue to affect fares, with the era of the €10 flight in jeopardy as long as oil prices stayed around $100. The Ryanair chief predicted fares could rise by up to 20 per cent in the next four to five years. “Does that mean the end of low-fare flying? No. But I do think over the next four or five years our average fare which last year was €40 will rise to €50 or more,” he said. “I think airfares will rise, generally speaking, because there’s a lot less capacity in Europe.”
However, Mr O’Leary said the airline wasn’t opposed to an eco-tax, as long as it was fairly applied, and that it was “inexplicable” that long-haul passengers transiting through airports weren’t paying the tax.
“We accept passengers will have to pay some environmental tax going forward; what we are objecting to is the discriminatory way these equal taxes are being rolled up by European governments,” he said, adding that a tax calculated based on percentage of the fare would be more equitable.
