Ryanair's O'Leary: price war to revive air traffic. What about fear?

Premium Analysis

In a Reuters interview on 15-Apr-2020, Michael O'Leary said that Ryanair expected to win a price war once coronavirus restrictions were lifted.

The long-serving Ryanair Group CEO expects a swift rebound in traffic, stimulated by "massive price dumping". He assumes a limited resumption of flights in Jun-2020 and a resurgence of intra-Europe travel driven by discounted holidays over the period Jul-2020 to Aug-2020.

In the past, growth in Ryanair's average fares and in its passenger numbers have been negatively correlated, but the correlation has weakened since FY2008. Mr O'Leary's bullish outlook is relying on this price elasticity of demand.

If Ryanair is the first major European airline to return significant capacity to the skies, its large network, strong balance sheet and ultra low costs should position it to win a price war.

Mr O'Leary told Reuters that people that have been "locked up in apartments", and will want to go on holiday "as long as they can do so in reasonable safety".

However, the perception of "reasonable safety" of air travel has changed. It now includes the fear of infection by COVID-19, or other diseases. A price war will not solve the loss of confidence in travel.

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