Ryanair boss Michael O’Leary has criticised Britain’s Civil Aviation Authority for awarding Thomas Cook a licence just months before its collapse and said the package holiday market was finished.
Thomas Cook, the world’s oldest travel firm, collapsed last week, leaving more than 150,000 UK holidaymakers stranded abroad. O’Leary praised the CAA for its Operation Matterhorn rescue airline set up to bring back stranded passengers, but said it needed to do more to prevent airline failures in the first place.
“How you can license Thomas Cook in April as fit to fly for another 12 months and then it goes bust in September. [It] is something the CAA needs to address,” he said.
Speaking at a Reuters Newsmakers event, O’Leary added: “The CAA should be much more aggressive in requiring the shareholders of those companies to put up much more cash to get through the year, rather than allowing them to continually fail.”
The CAA granted Thomas Cook its airline operating certificate in April while its Atol licence, which guarantees repatriation and refunds for holidaymakers if their tour operator goes bust, was due for renewal this month. Thomas Cook’s airline was profitable and had been put up for sale in February. However, a buyer could not be found.
Kenny Jacobs, Ryanair’s chief marketing officer, said at a separate press briefing that Ryanair was lobbying the CAA to introduce more robust, quarterly stress tests for airlines and tour operators, and to force “financially weak” firms to set aside money to cover the repatriation of passengers should the companies go bust.
Brexit
“There is now little doubt that the Brexit process has led many UK customers to delay their holiday plans for this summer,” said the chief executive, Peter Fankhauser, in May. But it cannot be the whole story - arch-rival Tui has coped because its finances are healthier.
Weather
The summer heatwave of 2018 encouraged would-be holidaymakers to stay at home, undermining prices in the “lates” market where operators try to clear unsold holidays. There seems to have been a hangover into 2019, with customers calculating that waiting to book is a productive strategy.
Competition
A pincer movement of Airbnb and budget holidays has changed consumer behaviour, though Thomas Cook still managed to sell 11m package holidays last year.
Banks and debt
The tour operator has been attempting to shoulder a huge pile of debt for the past decade – £1.7bn worth at the last count. Successive managements failed to remove meaningful chunks. The banks argue they have supported an overstretched company for years and the details of why it could not be saved may have to await the report from the Insolvency Service.
Bad management
Thomas Cook’s borrowings were too high. The moral of the tale is that tour operators should fund themselves conservatively. If your balance sheet is fragile, you are at the mercy of events in an industry where most of the cash arrives in the summer and then flows out in the winter.
Nils Pratley, financial editor
The CAA said: “We thank Ryanair and the rest of the aviation industry for their support as we focus our efforts on repatriating 150,000 Thomas Cook passengers. The CAA is responsible for licensing travel businesses, including considering their financial fitness, and we take these responsibilities very seriously.
“We also take part actively in discussions about reforming the regulatory framework. We participated fully in the independent insolvency review which investigated what more could be done to protect consumers in the event of a future insolvency. We stand ready to work with the government and industry to implement recommendations from the review.”
O’Leary was blunt about the the package holiday market, saying it was “screwed, it’s over”.
According to the travel industry group Abta , half of UK holidaymakers took a package holiday last year, a figure that has held steady since 2014. Thomas Cook’s rival Tui has fared better, with strong demand for for holiday experiences. It also owns many of its hotels.
Ryanair, Europe’s biggest carrier expects passenger numbers to stay flat at 46.3m in the UK next year, despite a likely boost from former Thomas Cook customers. It launched 14 new routes including flights from London Stansted to Terceira in the Azores and Manchester to Pisa.
Ryanair still plans to shut some lossmaking bases, and warned some pilots would lose their jobs, as it has 500 more than it needs. Jacobs said the number of redundancies would be lower than that as pilots who quit will not be replaced and others are being offered unpaid leave.
O’Leary dismissed criticism of the €100m (£89m) bonus the airline could hand him over five years, saying it was an “easy target” for the mediaand they should focus on Premier League footballers’ pay instead.
O’Leary’s new pay package was passed by a wafer-thin majority of 50.5% of shareholders at the last annual meeting.
He said Ryanair would wait for “the next turn in the cycle” before ordering more Boeing or Airbus jets at cheaper prices.
The Irish carrier is one of the biggest customers of Boeing’s grounded 737 Max aircraft, with 135 firm aircraft orders and 75 options, and O’Leary said the company could add Airbus jets to its fleet in the medium term.
