Ryanair to ground 10% of fleet over the winter

Michael O'Leary, the Ryanair boss, said yesterday he would cut his bonus, freeze staff pay, raise fares and ground 10 per cent of the carrier's fleet this winter to offset record oil prices.

However, he warned that even with such cost-cutting measures, the airline – whose profit before tax fell by 2.88 per cent to €439m (£345m) in the year to 31 March – would only break even or perhaps make a loss in 2008-9 if high fuel prices persisted. Mr O'Leary said most of Ryanair's rivals, some of which had already folded, would fare far worse. "If we have to absorb these fuel costs, our profits will be severely dented," he added. "But airlines that are not as efficient as us will be losing horrendous amounts of money. There will be more bankruptcies."

His prediction came a day after Giovanni Bisignani, the head of the International Air Transport Association IATA, predicted total losses in the aviation industry could top $6bn (£3.1bn) this year.

Mr O'Leary denied the era of low-cost air travel was over and said Ryanair would try to keep fares low and absorb oil costs, "even if it means that our profits will fall in the short term". He said that if oil prices stayed at about $130 a barrel this year, Ryanair would have to raise its average return fare – €88 – by 5 per cent just to break even. If it did not do so, it would lose $125m.

He pledged never to introduce fuel surcharges, "even if oil reaches $500 per barrel", but said he might consider options such as raising fees for check-in, baggage handling and priority boarding.

Europe's biggest no-frills carrier is particularly vulnerable to oil costs because none of its fuel is secured on fixed-price contracts, unlike British Airways, which has hedged 70 per cent of its supply with such deals. Mr O'Leary said that, belt-tightening apart, Ryanair was pushing ahead with an aggressive growth plan. It will take delivery of 40 Boeing 737s this year, increasing its fleet by a quarter to more than 200 aircraft.

Mr O'Leary said he hoped this would hammer a final nail into the coffins of weaker rivals such as Flybe, SkyEurope, FlyGlobespan and Vueling of Spain. "You can either cut back and stop growing, or you can take the opposite view and increase growth and drive competitors out of the market," he added.

He predicted Ryanair would carry 59 million passengers this year – a rise of 17 per cent – despite plans to ground 20 planes based at Stansted and Dublin airports over the quieter winter months, with reduced frequency on some of its busiest routes, such as Frankfurt and Rome.

Mr O'Leary also criticised the Civil Aviation Authority and its chief executive, Harry Bush, with whom he has clashed over rising landing charges at Stansted and Gatwick. Mr O'Leary branded Mr Bush a "hopelessly stupid and incompetent regulator", and called for his resignation and those of the CAA board.