Ryanair CEO Says Downturn Good for the Company

Low-cost carrier Ryanair is likely to benefit in the event of a major slowdown hitting Europe, according to the airline’s chief executive Michael O’Leary.

AP Ryanair CEO Michael O'Leary

Speaking to CNBC, O’Leary said passengers would naturally turn to Ryanair and away from more expensive rivals as they tried to save money.

“I think we'll come out of this downturn significantly stronger, probably as Europe's largest airline,” he said. “If anything, we'll probably speed up the rate of growth during the downturn.”

Like most of its competitors, Ryanair is grappling with higher oil prices, which are biting into profit margins.

Shares in the Dublin-listed stock are down nearly 48 percent in the year, knocking the company’s market cap to some 6 billion euros.

Investors fear the airline is not sufficiently protected from further oil price shocks.

But some analysts say the carrier could benefit if prices do fall back below $100 per barrel, an event likely to be costly for those airlines that have put out expensive hedges at current levels.

O’Leary stressed the current market environment was not about improving profit margins but gaining market share.

“We'll lower the fares even more significantly during the downturn,” he said. “It does mean that profit margins are going to fall, it means profits will probably fall, certainly for the next 12 months. Frankly, shareholders are just going to have to take it on faith.”

Analysts agree Ryanair is well positioned to grow, especially as it still has unexecuted orders and options to buy dozens of Boeing planes over the next four years at prices well below current going rates.

The outspoken CEO added he’s also ready to invest more of his reported $3.2 billion cash pile back into the company too.

“We're investing in the future here, we're investing in building a much bigger Tesco of the skies here in Europe, and I think most [shareholders] will support what we're doing,” he said.

© 2008 CNBC.com