Flybe and Jet2 hit back over Ryanair's 'crappy airlines' destined to fail jibe
04.06.08
Budget airlines Jet2 and Flybe have hit back at Ryanair boss Michael O’Leary’s after he said that the fuel crisis will shut down ‘crappy competitors’, naming both airlines along with Flyglobespan, Sky Europe and Vueling.
During yesterday’s financial results briefings Mr O'Leary repeated a prediction that only Ryanair, easyJet, BA, Air France-KLM and Lufthansa to break even or make a profit this year, adding that Flybe, Jet2, Flyglobespan, Sky Europe and Vueling would probably be grounded in the coming months.
He added: ‘I hope oil prices stay high over the winter because we will get rid of a lot of crappy competitors. A few carriers will be safe but everyone else is in danger of going bust.’
But Flybe said in a statement: ‘We note with indifference the latest rantings of Mr O’Leary and note his usual attempt to deflect attention from his own results by making unsubstantiated accusations about other issues. Flybe also notes that Mr O’Leary used exactly the same tactic in 2001, 2002, 2003, 2004, 2005, 2006 and 2007.’
The airline said it would soon report record profits its last financial year and the highest ever operating margin, adding that its cash reserves 'were strong' . It added: ‘Flybe’s fuel costs are only 24.6% of its total cost base at today’s prices, whilst Ryanair’s are 44.5%. Mr O’Leary expects to break even at $130 a barrel, whereas we believe that fuel will have to be well over $170 a barrel before Flybe is forced to breakeven.’
Flybe also revealed that it has hedged 76% of 08/09’s fuel needs. It says its network is balanced well between business and leisure, with 84% of routes on double daily frequencies or more, ‘allowing insulation from consumers pulling in marginal consumer expenditure.’
Jet2’s boss Philip Meeson said in a rather less detailed or robust statement: ‘It won’t be Jet2 [going bust]. I’m sorry Mr O’Leary – unlike you, Jet2 has bought all its fuel for this summer, this winter and next summer at attractive rates. Our passengers can rely upon us for many, many years to come.’
Both airlines have not commented on the other side of the equation - consumer demand. Jet2's owner was forced to issue a profit warning because the airline failed to meet sales targets last winter. Higher prices and weaker consumer demand can only worsen this. Flyglobespan recently said that it has a £13m hole in its balance sheet after making loses of £19m last year. It also faces criminal charges over three alleged safety breaches. If we were forced to choose, we would back Mr O'Leary on these two. Flybe look strong though.
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