Ryanair boss Michael O'Leary expects the coronavirus to have a "meaningful impact" on earnings in the first quarter of the year, and said he cannot rule out further cuts to flights as the virus hits demand for air travel.
The airline announced a decision on Monday to cut a quarter of flights to and from Italy for three weeks from the middle of this month. It will operate a reduced short-haul flight programme, mainly to and from Italy, by up to 25 per from March 17th-April 8th.
Speaking to the media on Tuesday, Mr O’Leary said there would be a “meaningful impact” from the crisis on its first quarter earnings. “At the moment we’re expecting a 10 per cent decline in bookings through the months of April and maybe May,” he said.
Mr O’Leary said the airline would continue to monitor the situation, but that further cuts could be necessary.
“I think the big mover will be the Easter holiday – second and third weeks of April,” he said. “We don’t see any reduction in travel demand over that period of time.
“That situation could change as the situation evolves over the next couple of weeks, but all of my experience in this industry tends to suggest this will be a reasonably short-lived phenomenon.
“Clearly passengers are already beginning to cancel or avoid air travel. Most of the airlines are reporting a large drop in short term bookings, but I think it will be reasonably short-term.
“We are going to complete the flight schedules for the next two weeks, and we won’t cancel flights unless we can give all passengers two weeks notification. So we’re talking about the last two weeks of March and the first week of April.
“The big issue over the next week or two is will we roll that forward through April. There is a possibility we might.
“I suspect we won’t because I think the travel demand over Easter will be reasonably positive, and you’re emerging into a period when temperatures are rising. The conditions for the spread of viruses are not very propitious across Europe.”
Mr O’Leary said there had been some “hysteria” amd “lunacy” over the coronavirus, which he expects will “settle down either at or immediately post-Easter as long as events don’t get out control here in Europe, and I don’t think they will”.
Over the past week, he said, Ryanair has seen bookings decline by an average of 25-30 per cent on a daily basis, although routes to Italy are suffering a “very severe downturn”.
“There is certainly an immediate drop in terms of business [travel],” he said. “Leisure and short term tend to book well in advance and therefore we don’t see that disappearing. We don’t allow cancellations so we don’t see cancellations in leisure.”
Mr O’Leary said the airline had decided not to cut prices. “We have consciously taken the decision not to reduce prices,” he said. “Most previous events like this we would have slashed prices to keep people flying. We think that’s the wrong thing to do.
“If people want to travel now, they’ll travel, but pricing or stimulating excess air travel while the coronavirus is spreading across Europe is the wrong thing to do, so we will take the hit on our load factor over the next couple of weeks.”
