MICHAEL O'LEARY and 35 other senior executives at Ryanair will have their pay frozen in 2008 as the airline implements a €400 million cost-cutting programme to cope with an "enormous" increase in fuel costs.
Baggage fees and credit card charges for passengers are likely to increase this year, as Ryanair is faced with much higher oil costs from next month but has promised not to introduce a fuel surcharge.
"None of Ryanair's senior management team will receive any pay increase this year unless the current high oil prices fall and until we can see some prospect of profits being increased," the Ryanair chief executive said.
The pay freeze is part of a series of cost-cutting measures, which will be announced over the next few weeks. Mr O'Leary told a press conference in Brussels yesterday that Ryanair hoped to achieve €400 million in savings over the next 12 months, with an indefinite management pay freeze recouping €1 million to €10 million.
"We are renegotiating airport contracts, handling contracts, maintenance contracts . . . we want to reduce costs in every single area of the operation."
Staffing costs will be reviewed under the programme, which will also examine the airline's exposure to higher oil prices and currency movements.
The airline had hedged against soaring oil prices at $68 a barrel, but its hedging contracts expire on April 1st, exposing the airline to oil prices of more than $100 per barrel. It is largely unhedged after this date, but Mr O'Leary reiterated yesterday that the airline would hedge "like bandits" if crude oil fell below $80 a barrel.
Fuel accounts for more than one-third of the company's operating costs.
Mr O'Leary said last month that profits would halve this year.
"It's not going to be pretty for profits this year and it's not going to be pretty for our shareholders," he said yesterday.
Mr O'Leary received a package of €992,000 for the year ending March 31st, 2007, including base pay of €565,000, a bonus of €365,000 and pension contributions of €62,000. His remuneration was €808,000 the previous year. Mr O'Leary (47) said he still planned to step down in two or three years. There were six potential internal candidates who could replace him, he said, although he also encouraged the board to look outside the company. (Additional reporting: Bloomberg)
