Airbus on alert in wake of Ryanair's Boeing threat; O'Leary warns plane maker over contract.

Byline: NEIL HODGSON 

RYANAIR chief executive Michael O'Leary threatened to cut all links with US plane maker Boeing unless it bowed to the Irish carrier's terms for 200 new aircraft scheduled for delivery between 2013 and 2016.

The notoriously bluff Mr O'Leary believes Boeing has plenty of room for manoeuvre, saying: "We see no point in continuing to grow rapidly in a declining yield environment where our main aircraft partner is unwilling to play its part in our cost reduction programme by passing on some of the enormous savings which Boeing have enjoyed both from suppliers and more efficient manufacturing in recent years.

"We would prefer to grow, but, if Boeing doesn't share our vision, then I believe that Ryanair should change course before the end of this fiscal year and manage the airline over the next three years to maximise cash for distribution to shareholders. If we cannot invest our surplus cash efficiently in new aircraft, then we should distribute it to shareholders."

Mr O'Leary is prepared to wait and see who blinks first, but the stand-off could potentially benefit Airbus and its Broughton wing making plant, near Chester, if Ryanair abandons its Boeing links.

Airbus already supplies aircraft to the UK's two biggest no-frills carriers Ryanair and Easyjet, who this week positioned their ninth plane - a 180-seat Airbus 320 - at Liverpool John Lennon airport to service its two newest routes starting this week to Fuerteventura and Lanzarote.

Ryanair yesterday revealed that first-half pre-tax profits in the six months to September 30 recovered strongly. Trading results soared from pounds 94.4m at the halfway stage last year to reach pounds 376.6m due to a 42% cut in its fuel bills. Turnover was 2% down at pounds 1.6bn.

Passenger numbers grew 15% to 36.4m but the carrier, which launched five new routes from Liverpool JLA last week, warned that continuing price cuts on fares to stimulate passenger growth will lead to losses for the second half of the financial year. Fares dropped 17% in the first half and are predicted to fall a further 20% in the second half, but over the course of the year the group said it would still be profitable at a time when many competitors are struggling.

He said: "Ryanair remains ideally positioned to return to substantial profit growth as Europe emerges from this economic downturn."

Full year profits are forecast at between pounds 179m and pounds 269m.

NEW ROUTES: PAGE 14

CAPTION(S):

Take it or leave it... Ryanair's Michael O'Leary throws down the gauntlet to Boeing