ROGUES’ GALLERY – HYPOCRITES

1. Ryanair

It is almost a tradition that when it presents its quarterly or annual figures Ryanair announces that market conditions are tough (hence Ryanair has not performed as well as some might have hoped) but that this is actually good news because it means other airlines will go out of business leaving Ryanair to make more money. This line has been repeated since 2001 and most budget airlines are still in business! To add some spice to this year’s diatribe, Michael O’Leary decided to name some of the airlines he considered could fail in the next year. This is dangerous territory and too likely to end in legal proceedings. You simply cannot make statements that your competitors are heading for bankruptcy without some proper evidence.

We have a much better record at warning of weak airlines than Michael O’Leary. By chance, we happen to agree with him that the future for SkyEurope is bleak and we have said this many times. We do not agree that Jet2 is in imminent danger. It is owned by a profitable cargo company and, while its maverick boss may choose to downsize or sell the airline if he felt he could get a good price, we do not see impending disaster. Flybe operates a highly fuel-efficient fleet and works in a less price-sensitive market than Ryanair. After 9/11, it was rumoured that both bmi and Virgin Atlantic were days away from bankruptcy. In extreme conditions, no airline is safe, but Jet2 and Flybe are not top of our list.

On the other hand, it was only a few years ago that many were questioning the way Ryanair produced its balance sheets and were predicting a horrible collapse. Substantial growth and some profitable years have silenced the critics but this could be temporary. Ryanair has made large sums by buying new aircraft at knock-down prices and then selling them to leasing companies and immediately leasing them back. In a recession, this profitable spiral will end. Small airlines go bust through a mixture of incompetence and lack of economies of scale – but big airlines can go bust almost as easily.

2. IATA

‘Heathrow was branded “a national embarrassment” by the head of the world’s aviation community’ was a fairly typical lead story in many newspapers following a speech at the annual conference of IATA. British newspapers seem to take some perverse pleasure in foreigners criticising national institutions – especially when they are ones that have fallen on hard times. Maybe the newspapers should have looked more carefully at who was making the criticism.

Signor Bisignani clearly knows a lot about ‘national embarrassments’: until taking over as head of IATA, he ran Alitalia. Unlike Heathrow, Alitalia has been a national embarrassment for as long as anyone can remember and Signor Bisignani was singularly unsuccessful at improving matters. This is like Robert Mugabe criticising the US elections as undemocratic.

And a Special Award to The Times

We pointed this out when the story was first published, but it is simply too good to avoid a ‘we told you so’ repeat. On 19th February, the newspaper printed an article headed “Give Silverjet a break” that listed some highly questionable bits of evidence to support the claim that the airline was in better shape than many supposed. It ended with the line, “I believe the airline has a rosy future.” The next day, the newspaper commenced a special two-for-one promotion on Silverjet.

Maybe the timing of the article’s publication and the start of the two-for-one offer was entirely fortuitous…

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