Ryanair to pay dividends after talks fail

RYANAIR’S Michael O’Leary will be recommending a “very large” bonus for himself following the collapse of negotiations with Boeing on the purchase of new aircraft.

The airline will also have money to pay a dividend to shareholders from 2013 as it will not be spending the cash on the aircraft, according to Mr O’Leary.

Speaking to the Irish Examiner, he said he feels he deserves a very large bonus and added that he will never enter into negotiations with Boeing again.

The airline chief also said Ryanair will stop growing from 2012 onwards, when its current delivery stream runs out.

Its fleet consists of Boeing aircraft only, and it has more on order.

Ryanair confirmed yesterday that talks with Boeing over an order for 200 aircraft had failed. Mr O’Leary also confirmed that the airline is not in negotiations with Airbus.

Its share price rose almost 6% to €3.28 yesterday, its biggest gain since May 27.

Mr O’Leary said he’ll switch to a strategy of “significantly” reducing growth and capital expenditure to maximise cash to fund payments to investors. The Irish airline had been in talks with Boeing to buy 737-800 series short-haul jetliners with a list price of $1.4 billion (€970m) for delivery from 2013 to 2016.

The breakdown in negotiations won’t affect an existing order for 112 737s that will arrive over the next three years, increasing the size of the fleet by more than 50%, Ryanair said.

Davy analyst Stephen Furlong said: “The company couldn’t keep growing at the same rate.

“It needed to have some stabilisation and move to more moderate growth. For Boeing it’s a massive order that they’ve effectively given up.”

Ryanair will announce details of its revised business plan over the coming months. This will include plans for reducing capital spending that it said will generate “substantial” surplus cash for distribution from 2012 through to 2015.

Founder of EasyJet, Stelios Haji-Ioannou, said Mr O’Leary had accepted that “the era of endless fast growth and ever -larger aircraft fleet is near its end”.

The Boeing purchase collapsed after the parties failed to agree unspecified “terms and conditions” after settling on a price for the aircraft, Ryanair said. Mr O’Leary said earlier this month that talks were foundering because of issues including warranties and performance guarantees.

Boeing said it is “disappointed” that Ryanair chose not to buy additional 737s, having worked to find a solution that met the carrier’s needs while also making good business sense.

Bloxham analyst Joe Gill said cashflows at Ryanair will “mushroom”.

“That cash will be used to spin out special dividends for shareholders in the 2012-15 time frame,” he said.