Thirty-eight members of the senior management of Irish airline Ryanair, including chief executive Michael O'Leary, have seen their pay frozen in light of the increasing price of fuel, driven by rising oil prices.
O'Leary, who owns 4.2% of the airline and earned €992,000 (£780,000) last year including €565,000 basic pay, said "I think it's inappropriate for managers to be awarding themselves pay increases if profits are falling," and that pay would only be unfrozen if oil significantly decreased in price and "we can see some prospect of profits being increased."
Ryanair has currently hedged oil prices at US$68 per barrel, but this is set to expire, leaving the no-frills airline paying full market prices. "Our hedging finishes next week and we go from about $70 to about $100. Next year's fuel bill is going up by €400m. We only have around 10% hedged in the high $70s for next year and I wouldn't be hedging now. We'll take our chances in the markets," explained O'Leary.
UBS analyst Tim Marshall estimates Ryanair's fuel bill is set to increase €732m this financial year to €1.01bn. UBS predicts a profit of €485m for this year, but O'Leary says profits could be down to €235m between now and March 2009, dependent on "oil prices and average fares". In light of the news, shares in Ryanair fell 2¾ cents to €2.96½ each.
Ryanair is trying hard to reduce costs, O'Leary saying they were "renegotiating airport contracts, handling contracts, maintenance contracts. We [Ryanair] want to reduce costs in every area of our operation." He said prices for passengers are set to go up, as "bag charges will keep going up until we can persuade half of our passengers to travel without checked-in luggage so we can get our handling charges down". At present, around 40% do this.
He said that to fill an extra 30% of seats the airline will keep fares relatively low. "We won't have to cut the fares like hell but they are not going to go up... More will fly with Ryanair than British Airways, Air France and all the other high-priced airlines."

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Ryanair executives pay frozen over increased fuel prices