Airline Leader Interview Ryanair CCO Jason McGuinness

Transcript

Henry Harteveldt:Good morning, ladies and gentlemen. I'm Henry Harteveldt from Atmosphere Research. It's my pleasure to be able to introduce Jason McGuinness from Ryanair, Chief Commercial Officer. Jason, please have a seat. Thank you.

Jason McGuinness:Couch. Yeah.

Henry Harteveldt:So, We've got roughly half an hour. A reminder, you can submit questions for us via Slido. They will show the code up there, so scan that and submit your questions, please, and we will do our best to get to them. So, Jason, nice backdrop with, you know, Ryanair, number one airline in Europe. 95 bases, 223 airports, 36 countries, more than 640 planes with 300 on order, 200 million passengers projected for your fiscal year this year. And what is it? It looks like 300, at least 300 million by what is it, 2034. So yeah, you're just coasting, right? Nothing to do. You're going to go to the beach all the time, right?

Jason McGuinness:Something like that. Yes.

Henry Harteveldt:You know, we are gathered, as, as Senator Giffey said, amidst a very challenging environment for us. And I'd like to start just by talking with you about the topic that so many of us have been focused on, which is the current environment and the challenge with jet fuel. It seems that while there's a lot of media focus on the risk of shortage, it's more a matter of fuel cost that is driving airline actions. And I'm just curious, from Ryanair's standpoint, how concerned are you about fuel supply versus the cost of the fuel to operate the schedule you would like, at least for the summer?

Jason McGuinness:Yeah. Good morning. Good morning, everyone. Very happy to be here in Berlin this morning. Particularly with yourself, Henry. Yes, more black swans. We've had more black swans than white swans in aviation over the last number of years. Generally, in terms of Ryanair at the moment, I'll come back to your question, we're very much in growth mode at the moment. We took delivery of our last A200s in February. All 210 of those are in the fleet for this summer. We'll be operating 645 or thereabouts aircraft across, across this summer. Demand for us at the moment is very strong. As you can see, we delivered 208 million passengers in the last financial year. Yeah, in terms of supply and oil, it's clearly the topic of the day. I can't add anything more than everyone else in this room knows. 20% of the world's fuel supply is coming through the Strait of Hormuz. What's the impact in terms of jet fuel in Europe? I think it will vary by country. We're reasonably— We're reasonably happy where we are in terms of the moment, in terms of what suppliers are saying to us. But I agree, supply for me isn't necessarily the issue. I think the issue for European airlines over the next 12 to 18 months will be price. Clearly, airlines— we're in a very fortunate position that we're 80% hedged for our next financial year at under $700 per metric tonne. But you have many, many airlines paying spot rates at the moment of over $1,500 per metric tonne, and the maths don't add up. So I think what you're going to see over the next number of months, 12, 18 months, is a mass of cancellations by competitor airlines. They simply do not have the balance sheet to operate. So capacity is going to come down in Europe over the next, next 12 to 18 months. There's going to be consolidations and inevitably there's going to be bankruptcies.

Henry Harteveldt:You know, we heard yesterday and airlines have been pretty open about it, that, that markets and routes that are on the margin are are now pretty much the ones being cut first. But it looks like that's— as large as some of these numbers are, it's relatively small overall.

Jason McGuinness:Yes.

Henry Harteveldt:So far. So far. But it's still, what, 2% in the 3%, 4% range. So the question I've got for you is, you know, as these airlines cut their routes, I mean, I'm looking at this map of Europe where it's more a matter of where Ryanair does not fly than where you do. You know, are— do you see opportunities to grow? You know, obviously at the airports that can handle your aircraft, but are there going to be opportunities, whether it's new cities or, or knitting together more of the markets that you all are already serving, or both?

Jason McGuinness:I think our growth, as we look out over the next 10 years, we're going to add 100 million incremental passengers. A large part of that will be in Central and Eastern Europe, where we are Central and Eastern Europe's largest airline. We're growing our Central and Eastern Europe capacity by about 20% this year. To give you an example, in Poland we're adding 10 aircraft across, across all of our bases. So our growth will be predominantly in Central and Eastern Europe, but what we've certainly noticed over the last 6 months, particularly since the crisis started in Iran, is airports that previously weren't talking to us are now coming to us worried about their incumbent airlines. So they're, I think, The sensible ones are trying to pre-plan, particularly to your point in terms of cancellations have been not that high so far. But wait until we get into the winter.

Henry Harteveldt:Right.

Jason McGuinness:Like, let's see what happens then. Oil is still very high, very— the price will be still very high, I think, as we come into the winter period. I think we're just going to see a raft of cancellations across the winter period. And I think those sensible airports are trying to get ahead of that, talking to Ryanair, where they will know they will have secure capacity and broadly guaranteed growth.

Henry Harteveldt:When we were speaking to prepare for this and talking about airports, you said that, that airport cost is the most important factor. I mean, obviously, aside from things like the runway and, and everything, but, but assuming the airport can handle the aircraft, airport cost is topic number one. And, and, you know, you've mentioned— you just referenced Krakow. Because of its favorable cost. You're the pretty girl at the dance.

Jason McGuinness:Well, Ryanair is the pretty girl at the dance.

Henry Harteveldt:Thank you. Yeah, but yeah, Ryanair is the pretty girl at the dance. Every airport wants Ryanair. Every airport wants more Ryanair than they have. Not every airport's going to be able to get all that they want. As you go through it, there are probably airports here. They're, you know, everybody's interested. How do you go about making the decision? Besides cost, I mean—

Jason McGuinness:There's only so much I can do. Ultimately, it's up for the airport to decide whether they want growth for Ryanair or they don't. It's very simple. We're very clear in terms of how we allocate capacity. We allocate capacity based on cost because it is the one truly variable network— sorry, variable cost in our business. And we allocate capacities to those airports, countries, and regions who are working with us to reduce cost. And you can see that in terms of where our growth has been post-COVID. Like, we've added in the region of 20 to 30 million additional passengers into Central and Eastern Europe over the last, over the last 3 to 4 years. This year we're growing in Poland by 20%, we're growing in Albania and Tirana, we've opened our latest bases, now 4 aircraft base, we're growing capacity there by 100%, and we're growing in Bratislava by close to 60%. Conversely, in Germany, we're continuing to take capacity out of Germany. because costs are too high. We have a confluence of factors here, be it aviation taxes where the government committed to reduce the aviation tax but then decided they wouldn't reduce it by as much as they said they would. ATC charges have trebled pre- and post-COVID in Germany. Airport charges in Germany have increased broadly by about 50% pre- and post-COVID. And the, uh, you can see that then in the recovery. Germany is the worst recovered aviation market in Europe. Capacity is still 10% behind where it was prior to COVID. So these— it's basic maths. If your costs continue to go up, which they are in Germany, capacity will go elsewhere, particularly when it's a competitive market, which it is at the moment. And sometimes that's the part that airports don't get. It's not the Ryanairs coming in shouting, reduce costs, reduce costs. No, it's what your competitors are doing, your competitor airports, the vast majority of whom are reducing costs to attract scarce airline capacity.

Henry Harteveldt:And, you know, yesterday, the minister, one of the ministers from— German ministers was here talking about it. He was very proud of how they were reducing the cost. But you're saying that they're not cutting the cost as much as they had committed to. So how big is that delta? I mean, is it many, many millions or is it—

Jason McGuinness:I think they committed off the top of my head to reduce it by just over €3 and they're reducing it by €2.50. but off an aviation tax of €15 per departing passenger. Our average fare during the winter is about €35, so you do the maths on that.

Henry Harteveldt:Right.

Jason McGuinness:So we are going to continue, unfortunately. The mayor had a great speech in terms of the vibrancy of Berlin, all of which I agree with, but the one thing they also tackled is competitiveness. And at the moment, German aviation is wholly uncompetitive, and capacity is going to continue to migrate away from Germany to more competitive countries, airports, and regions across Europe.

Henry Harteveldt:Within, within what we, I guess we would call Western Europe, are there certain countries that are more competitive for Ryanair?

Jason McGuinness:You take Italy. Italy is Ryanair's biggest country market we're going to have in the region. 65 million passengers in Italy this year, based 111 aircraft across 20 bases. And what you have there is a very competitive ecosystem. where airports are competing for that scarce capacity. You have regions within Italy who are even abolishing their aviation taxes. So they're competing very, very, very, very aggressively, trying to attract capacity and broadly speaking, doing a very, very good job.

Henry Harteveldt:So, so, you know, I'm glad you brought up Italy because my understanding is you have actually used AI and technology very wisely to optimize your scheduling within Italy, and it got you the equivalent of like a 6% improvement on aircraft utilization. That's phenomenal. That's like, you know, on a 111-plane fleet, you're getting more than 6 airplanes worth of additional flying. Share with us, you know, is it just AI magic that did it? I mean, what did you know?

Jason McGuinness:It's a little bit beyond my pay grade, to be honest. But to give you an example of where we're at, for our 640 aircraft this year, they're all operating on average 6 flights per aircraft per day. So it is the Ryanair model. We sweat the asset, but that's the— that is the— what we bring to the airport. We're bringing 6 flights per day. Our average load factor is 95%. So that's a great selling, selling point in terms of Ryanair, what we bring to an airport and a region. It is a function of big numbers in terms of a computer can optimize the schedule much better than humans. But unfortunately, the actual tech behind this is beyond my pay grade, Henry.

Henry Harteveldt:It's beyond mine as well. All right. You mentioned, you were talking about a moment ago about air traffic management costs. European air traffic management is not always the greatest.

Jason McGuinness:Terrible. Okay.

Henry Harteveldt:And so let's talk about this. I mean, it's not easy to do. I want to be very fair to the people who are there. They're doing their jobs, but it's not—

Jason McGuinness:they turn up.

Henry Harteveldt:Well, I was just going to say it's not fair to you because when they go on strike in one country, it affects your ability to do overflights, not just taking off and landing. Let's talk about this because all the airlines suffer with this.

Jason McGuinness:And consumers.

Henry Harteveldt:And consumers. So from your perspective, you know, how much are these delays costing Ryanair? What What does Europe need to do? Are they listening to you when you talk to the legislators about whether it's investment in the technology, the people, the policies, whatever it is?

Jason McGuinness:Are you listening? No, they're more interested in regulating how many bags we can bring on board. So no, they're not listening. I think when you— when we step back a bit, the Draghi report was an excellent report and it covered Some very good pieces in terms of aviation and covered ATC, I think, in a very, very clear and concise manner. It pointed out that the ATC, this dysfunctional system that we currently have, is costing Europe in the region of €6 billion in unnecessary costs per annum, and it's creating about unnecessary CO2 emissions about 11 million tonnes per annum. So it is complete, it is a complete sham. In terms of Ryanair, last year of our 200 million or 208 million passengers, about 33 million of those people were delayed. We had last July when the French air traffic controllers went on their annual strike across the 4th and 5th of July, there was 1,500 flights cancelled across Europe because 2 or 3 people didn't turn up for work. So we've been very clear in terms of what we've said. We think 2 things will fix 90% of the delays. Overflights have to be protected as they are in Italy, Spain, and Greece at the moment. We respect the right to go on strike, but if you go on strike, that does not mean overflights should then be— have to be cancelled. The second thing is make sure the first wave is staffed every morning, and if it's not, then there's penalties applied to these ATC providers. ATC costs have gone up by in the region of 30% across Europe over the last 3 years, and And delays have also gone up. So it makes no sense. So we— Europe needs to get on top of this. We have— Ryanair has been very loud and very vocal on this. But is Europe listening at the moment? Unfortunately, I would say no.

Henry Harteveldt:So, you know, do you, do you feel there's a bridge to getting them to listen to this more? I mean, what's the solution for all of these legislators to be stuck on a runway somewhere and then You know, they say, hey, this is your fault.

Jason McGuinness:Potentially. But I think it comes back to the Draghi report that was issued in September 2024, for memory, almost 2 years. There was lots of very important competitiveness initiatives in that. And from what I can see broadly, none of them has been implemented, not just for aviation. We are in a changed world, as we can all see over the last 12 to 18 months. It's time for Europe to stop regulating and let's get on with driving competitiveness.

Henry Harteveldt:across Europe.

Jason McGuinness:An ATC is an easy fix.

Henry Harteveldt:But you say it's an easy fix, but it doesn't seem like it's an easy fix because—

Jason McGuinness:It is. Just protect the overflights and make sure the first wave is staffed.

Henry Harteveldt:As you talk with air traffic management organizations, or your peers do, are they telling you they're able to recruit the people that they need to? This has been a challenge in the US, for example, that Air traffic control management careers are just not something younger people think about, and the Secretary of Transportation in the US now wants to recruit people who are really into video gaming to consider careers as air traffic controllers. Are you confident that Europe can get the people it needs to be in the towers, in the centers?

Jason McGuinness:Absolutely. These are very, very— these are excellent jobs. There is no issue attracting people into these jobs. The management teams of these ATC providers just need to actually do their job. Make sure you're fully staffed, make sure the first wave is fully staffed, and then at a European level, overflights have to be protected.

Henry Harteveldt:Okay, let's talk more about the Ryanair customer. You know, we're on the verge of summer. Summer looking good? Are you pleased with where the bookings are?

Jason McGuinness:You know, I'm limited in terms of what can I I can say because we're in a closed period since our results will be out shortly. But demand is very strong. Like, our initial passenger target for last year was 206 million passengers. We increased that to 207, and we eventually finished at 208.4 million passengers, which gives you an indication of how strong the demand for Ryanair is at the moment. Generally, volumes are very strong at the moment, but I think that's what you see at any time that crisis, there is a flight to safety, a flight to quality airlines. And generally speaking, what happens when there is a crisis, Ryanair emerges from that crisis much, much stronger.

Henry Harteveldt:You know, we actually have a question from our audience about product strategy. It looks like Lufthansa will launch the equivalent of what in the US we call basic economy fare to compete on a price standpoint with budget airlines. We talked about this trend of premium leisure that's emerged, and you said it's just not something Ryanair is interested in. And you talked about the need to stay focused. So talk about that, because it's, it's refreshing to hear an airline say, you know, we're not chasing the bright, shiny toy.

Jason McGuinness:We're not. Our product is very, very good. Like, we, we deliver on-time flights at the, at the lowest fare possible. And that's what our customers want. I think this— there's a lot of distraction in the market at the moment, holiday products or premium leisure. Generally speaking, that's from airlines whose load factors are in the mid-70s, 80%, and they want something new to talk about. What we're focused on is delivering our growth plan, growing from 208 million passengers this year to 300 million passengers by FY34, taking delivery of our 300 MAX 10 aircraft, which start from next year and delivering those high load factors year-round. And we're very focused on that. And we don't engage in superfluous, oh, premium product, we're not going to sell the middle seat so a business class passenger can buy it. That's just airlines who aren't, who are not able to sell their product.

Henry Harteveldt:But Ryanair is back in GDSs, right? At least in certain GDSs. How important are business travelers to Ryanair, as you know, versus leisure? I think you're known more as a leisure I disagree.

Jason McGuinness:Like, I think in terms of our passenger profile, like, we don't profile passengers. We have an excellent offering for business passengers. We have, if you take our London to Rome route, we're operating 3, 4 times a day. It's the best service out of both cities. So we don't profile the passenger, ask, are you traveling on business, are you on leisure, etc.? Ryanair has more business passengers than anyone else across Europe.

Henry Harteveldt:Yeah.

Jason McGuinness:Why? Because we offered the lowest fares and the best on-time performance.

Henry Harteveldt:And that is truly what the customer wants. If you're not on time, nothing else matters.

Jason McGuinness:Absolutely.

Henry Harteveldt:But then it goes back to that air traffic management.

Jason McGuinness:Yeah, absolutely. Well, we couldn't— I've given you my views on how 90% of those delays could be avoided.

Henry Harteveldt:Okay. So, you know, we had a panel yesterday about monetizing non-air revenue. So Basically everything beyond the base fare. And this is an area where Ryanair really excels. How do you look at growing that part of the business? How do you figure out, okay, we'll sell this, we won't sell that? Are you really trying to focus more on airline-related products? Are you going to get into trying to sell people, you know, t-shirts for their holidays or something like this?

Jason McGuinness:Yeah, I'm not sure how successful Ryanair t-shirts would be, but maybe, maybe, maybe, maybe there's something in that, Henry. No, we're very focused on our own products. We're very focused on optimizing those for our customers, be it our seating, baggage, etc. So we're very focused on that, growing our own internal and ancillary revenue streams. Now, it will generally increase as we grow the number of passengers. So our, our main focus is growing capacity, bringing growth across Europe. And our mantra is load factor active, yield passive. So we will, we will hit our load factor and we'll reduce the fares or ancillaries to whatever level we need to do that.

Henry Harteveldt:You know, holidays were a product that came up yesterday as a scenario of revenue growth and customer engagement. Does that fit into the Ryanair model?

Jason McGuinness:Generally speaking, that's airlines who aren't growing their capacity and want something to talk about at panels or with investors. They're broadly making it up. There's nothing in it. We're focused on actually growing capacity. Rather than talking about some holiday product where revenue is slightly higher. Okay.

Henry Harteveldt:All right. There's a question here from the audience.

Jason McGuinness:You know, the angrier the better, by the way.

Henry Harteveldt:With the growth that you've, you've had and amidst the challenges of fuel, you've got a lot of new aircraft in your fleet. The 737-10s will soon be coming next year. You know, are you sticking with the decarbonization targets? Is that— I mean, SAF has been an issue for the entire industry. Are you seeing any progress with that? Where, you know, sustainability is certainly more important.

Jason McGuinness:I'm seeing very— sorry, I'm seeing very limited progress on SAF. In terms of our commitment in terms of decarbonization, it is, as you say, it's the new aircraft that we're investing in. The A200 and the MAX The MAX 10s are going to be fantastic aircraft. The MAX 10s are going to reduce our fuel burn and emissions by 20% per passenger and reduce noise emissions by 50% versus our current 800 fleet. So that's how we're investing at the moment, investing in new aircraft. But in terms of Europe and its approach to SAF, it's been very, very disappointing. They have targets, but no one can explain how anyone is going to actually achieve these targets given supply is not where it needs to Okay.

Henry Harteveldt:Let's talk about Ryanair growth. You know, in the US, Spirit Airlines is on the ropes. The president has said the government may or may not invest in an airline. I would just remind the president that he spent $365 million of his own money to buy the Eastern Airlines shuttle, and that doesn't exist anymore. You know, he doesn't have the greatest track record when it comes to airline investing. But if an investor came to you, whether it's for Spirit or whether it's in Asia or anywhere else, and said, we'd like to franchise Ryanair in this part of the world, is that something the company—

Jason McGuinness:Very short conversation. No.

Henry Harteveldt:Why?

Jason McGuinness:We've no interest.

Henry Harteveldt:Why?

Jason McGuinness:We're growing to 300 million passengers, Henry. That's where all of our focus is. We don't get distracted by, oh, invest in this, that shiny new beans.

Henry Harteveldt:Not you investing, but if someone said we'd like to license the name and pay you the royalty.

Jason McGuinness:Why would we do that?

Henry Harteveldt:To grow the Ryanair?

Jason McGuinness:No, no, no, it's like we're very focused on growing from 200 to 300 million passengers. We don't get distracted. That's what happens in some of these airlines, they get distracted, and hence why a lot of them are very highly leveraged, highly leveraged at the moment. The only money they make is through sale and leasebacks and get very excited in terms of, oh, we'll, we'll do this naming project, etc. Focus on actually delivering, and that's what we do every day.

Henry Harteveldt:Several years ago, Michael O'Leary had a very famous, perhaps infamous, comment about Ryanair considering long-haul operations. That clearly has not come to pass.

Jason McGuinness:I'm not sure Michael ever said that, to be fair, but he's well able to speak for himself. He doesn't need me to do it.

Henry Harteveldt:But, but, you know, Is long haul something that Ryanair would ever consider because the range now of the 737 MAX 8?

Jason McGuinness:Again, again, it's a distraction. Like, we are focused on doing what we do very, very well. That's delivering high aircraft utilization, high aircraft productivity. And there is an enormous amount of opportunities for us across Europe at the moment, particularly when you take into account the amount of new airport capacity that's coming into Europe over the next 10 years or so. There's in the range of, I think, in the range of airport capacity, there's going to be an extra 500 million available seats in terms of what's being built. So there's going to be an enormous amount of opportunities for Ryanair intra-Europe, particularly across Central and Eastern Europe, and that's what we're focused on, growing from 200 to 300 million annual passengers.

Henry Harteveldt:Do you think that with, you know, by 2040 you could be a 500 million passenger a year airline?

Jason McGuinness:Is that by 2040? 2040? Pretend— well, I'll be old and gray and gone by then, so that's— I'm not sure. We'll be both in a bad situation. Yeah, look, the demand— I'm not going to put a limit on our ambitions. I think the first thing we have to do is get to 300 million, right? It's a very large annual passenger number. No other airline in the world has ever done that before. We're very focused on that. But I think beyond that, who knows? I think there is certainly more Ryanair growth left. Post, post 300 million passengers.

Henry Harteveldt:Is, you know, to become— I mean, to do the growth, you need the people. Is it a challenge to recruit people to come to work for Ryanair right now?

Jason McGuinness:No, it's quite the opposite at the moment, particularly when you look at our base network across Europe, the 95 bases. We're oversubscribed in terms of applications for first officers, pilots at the moment. Why? Because they see the growth coming. They know there's a chance to move from being a first officer to a captain within a very, very short period of time. That doesn't happen in other airlines. So the growth that we're going to deliver means that there is an excellent pipeline of opportunities in Ryanair for growth. And people see what we're doing, even in terms of we are going to build our own 2 engine shops over the next, over the next 5 years, also creating highly paid, highly skilled jobs. So we're very much in growth mode, and I think that message is out there, and that's why we have, I think, close to 30,000 staff at the moment delivering this summer 3,700 flights per day, every day across the summer.

Henry Harteveldt:You know, you mentioned the engine shops, and I'm glad you did, because one thing I've heard from some airline executives are concerns about recruiting people to work in maintenance, repair, and overhaul roles, that again, it's just not careers people always, you know, younger people always think about, you know, are you able to find the, the people?

Jason McGuinness:Yeah, I would say that's the exact opposite of what we found. We're currently, uh, we are currently, we're going to open 2, and there's currently between 5 and 6 potential locations for those, uh, for those 2 engine shops, and the supply of labor is excellent in all of those locations. So we haven't seen that. Uh, we're going to proceed with our 2 engine shops, and I think Wherever those 2 locations are, it's going to be a great boost for the local economy in those locations.

Henry Harteveldt:Ryanair has been a dedicated Boeing customer for a very long time, and you have a strong partnership, perhaps one of the strongest in the industry. You know, if Airbus came to you and said, hey, here's a plane that might carry 250 people, would you consider something like that? Is that too large for Ryanair?

Jason McGuinness:I would consider— we would consider Airbus aircraft once they tell us the cost. And usually what happens is they tell us the cost and we say thank you, but no thank you.

Henry Harteveldt:But, but 250-seat airplane is not out of the range in terms of capacity that you'd be worried about?

Jason McGuinness:It's not something we're actively considering at the moment. The MAX 10s will have 228 seats. We're very happy with that. We think that's the right number at the moment. Who knows, at a point in the future, do you look at a higher density? Perhaps. But the MAX 10s are the right aircraft for us now.

Henry Harteveldt:Okay, on that note, thank you, Jason. This has been a terrific conversation. I think that we now have a short video that CAPA is going to show, and then we will move on with the morning program.

Jason McGuinness:Thanks, Henry. Great, thanks very much.

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