Ryanair boss tells investors to ‘grow up’ over his €150mn share scheme
Michael O’Leary warns that air fares could rise by a fifth as he defends latest airline contract
Ryanair’s investors who object to Michael O’Leary’s €150mn share rewards scheme need to “grow up”, the combative airline boss has said.
After 40 per cent of Ryanair’s investors voted against a contract for O’Leary this month, the airline now has to hold shareholder meetings to smooth out objections to the pay scheme, he complained on Wednesday.
Earlier this month, six out of 10 Ryanair investors backed O’Leary’s next contract from 2028, which will give him access to shares worth €150mn only if the airline increases its share price by 40 per cent or hits €4bn post-tax profit.
Some investors who objected “didn’t think the targets were aggressive enough”, O’Leary told the FT. “Ah lads, grow up . . . these are very ambitious, very aggressive targets, and if they’re delivered, all of you shareholders will almost double your money from where the share price is today,” he said.
Other investors objected because of their “ESG teams who just don’t like big egregious pay”, he added. They did not mind when footballers or their managers received £25mn in pay, he said.
Because the incentive scheme failed to secure 75 per cent approval, the airline now has to hold consultations with investors, even though the scheme itself will not change.
O’Leary, whose airline is the largest in Europe, also warned about rising airfares and said the company was cutting winter flights to save money.
He saw air fares for next summer rising 10 to 20 per cent if fuel prices remained at current levels. The price of jet fuel, which has nearly doubled during the Iran conflict, “may well be the norm for the next six to 12 months”, he told the FT.
He also warned that air fares could nearly double within the decade if jet fuel prices remain at higher levels.
“If [jet] fuel stays at $140 a barrel for the next five years, the average air fare will go from €50 to €80-€90 a ticket,” in the next six to eight years, he said. “There is no doubt in my mind, we’re underpricing air travel in Europe.”
Michael O’Leary: ‘There is no doubt in my mind, we’re underpricing air travel in Europe’ © Yui Mok/PA Wire
Deregulation of air travel in the US a decade ago meant that formerly low-cost carrier Southwest Airlines now has average air fares of $175, compared to Ryanair’s €50, he pointed out.
The airline will not cut flights next summer, when it believes customers will tolerate higher fares. But it is stripping back capacity this winter, taking out services on Tuesdays and Wednesdays, as well as Saturday afternoons and early Sunday mornings in November and December, as well as in mid-January.
The carrier is significantly less hedged on jet fuel than in the past, as it waits for global prices to drop. Historically Ryanair has bought about 80 per cent of its fuel a year in advance; however, it is only 40 per cent hedged at the moment.
“We’ve made the decision to not hedge aggressively into next year because we think current prices are too high,” he said. “But we may call that wrong.” The carrier wanted to lock in prices below $100 a barrel, he said, in the hope that the US midterm elections in November may provide a catalyst for lower prices globally.
The industry’s reticence to lock in higher prices means that “none of our competitors are well hedged either”, he said, “so we’re all in this much more floating marketplace, which is why [the industry is] looking at fuel surcharges and higher fares next summer”.