By Andras Gergely and Paul Sandle
DUBLIN/LONDON, July 15 (Reuters) – Ryanair and British Airways will cut flights next winter due to the rising cost of fuel which is threatening to wipe out their profits this year, the two companies said on Tuesday.
Ryanair, Europe's biggest budget airline, said it would cut weekly flights at Dublin by 12 percent this winter and it would also cut some at Stansted in the UK.
Separately, British Airways said it expected to reduce capacity by 3 to 5 percent in its winter season.
BA chairman Martin Broughton said the airline is looking at extra fuel costs this year of more than 1 billion pounds ($2 billion), which is more than last year's record profit of 875 million pounds.
"I don't want anybody to be under any illusions that in the current operating conditions, it will be a considerable achievement for British Airways to break even this year," he said at the company's annual shareholders' meeting (AGM).
The British flag carrier will cut flight frequencies but it will not cut any long-haul routes, Chief Executive Willie Walsh told reporters at a press conference after the meeting.
But he added there could be "one or two" short-haul suspensions in the plan, which will be finalised in the next fortnight.
Ryanair, which made a net profit of 481 million euros in the year to the end of March, said its guidance was unchanged for this year.
"This year we are going to make very little or no money if oil stays around $130 to $140 a barrel," Chief Executive Michael O'Leary said.
BREAK EVEN
Ryanair said earlier this year it hoped to break even in the current year through March 2009, based on average fares rising some 5 percent and an average oil price of $130 a barrel. On Tuesday, oil was traded as high as $146.
All in all, Ryanair expects to ground just over 10 percent of its fleet for the winter, O'Leary said, adding he expects Ryanair to carry about 58 million passengers in the year, 1 million fewer than an earlier forecast.
The bulk of the cuts will come from Dublin and Stansted, though there will be expansion elsewhere. Earlier on Tuesday, Ryanair announced four new routes and increased capacity in the Swedish capital Stockholm.
O'Leary reiterated that tough conditions would help Ryanair in the longer term against rivals which have higher costs or less cash.
Asked about Ryanair's purchase this month of an additional 3.5 million shares in Irish rival Aer Lingus, O'Leary said: "We had kind of 5 million (euros) lying around with no home for it so we bought them."
But he added that Ryanair was now too close to the 30 percent mark, at which it would be obliged to launch a full takeover bid, to be actively seeking to buy more shares.
"We could buy about another 500,000 or 600,000 shares," he said. "If somebody came to us with a bundle of 600,000 shares, if that's what we could buy, we'd do it, but only in one lump."
The European Commission last year blocked a bid by Ryanair for Aer Lingus on competition grounds but subsequently also rejected a request from Aer Lingus that it force Ryanair to reduce its stake.
