There is something so appealing about the candour of Ryanair. On Monday, first Michael O’Leary and then Michael Cawley, mentioned the R word.
Yes, there could be a recession in the airline business but as far as Ryanair’s top brass are concerned, that’s life.
O’Leary announced that there are going to be tough times ahead. He even suggested to investors that Ryanair’s profits could fall by 50pc next year.
Cawley was even more candid on Matt Cooper’s programme when he said that Ryanair would move aggressively into the downturn, slashing prices where they could and investors had to either come along for the ride or bail out now.
Ryanair’s management’s stance on oil was again unusually honest. If there is to be a recession, then oil prices will fall and as they do, one of Ryanair’s major costs will fall too. So rather than “hedge” their petrol exposure they are betting that oil prices will fall. Their view is “bring it on” and make the best fist of a bad situation.
Given the corporate bulls**t that most company bosses and their PR lackeys spew out day after day, it is a breath of fresh air to hear Mr Cawley.
Here is an adult treating the rest of us like adults; no spin, no obfuscation just the facts as they stare the management in the face.
They are looking at a fall in demand and a possible rise in costs which they can do nothing about. The Ryanair view is that their profits might fall, but so too will the profits of their competitors and the downturn gives them a chance to expand their market share at a time when everyone is suffering.
Now this might all be bluster from a company that has over-invested just as the industry is turning down, but the form of the Ryanair management is to tell it as it is. This is what makes them different.
Contrast this honesty with the type of stuff we are still hearing from estate agents. Rather than tell the truth that stamp duty revenue has halved since this time last year and will obviously go lower again, they are spinning about recovery before they have even admitted a downturn!
However, if you drive out to the newer suburbs or go onto any property website, you will see what is going on.
To save yourself the trouble, just log on to www.daft.ie and go to their map which shows how many properties are for sale all over the country.
It reveals the same pattern as we have seen in the US over the past few months: properties in the outer suburbs are now coming on stream almost daily and they are not moving.
For example, in one newly built estate — called Hopkins Haven (the name alludes to Gerard Manley Hopkins’s apparent fondness for the area) — in an outer commuter town like Monasterevin, neighbours are vying with each other to get up their For Sale signs.
There are five properties for sale on the one road here — all put on the market recently. There are 93 properties for sale in the town and all prices are falling.
This is Deckland and the trends for Deckland are ominous. Having spent more than a year there while researching ‘The Pope’s Children’ in Ireland’s commuter towns, I was fascinated by the explosion of outside decking in Ireland.
During the boom, most of us were prepared to dispense with our critical faculties and dream. So in a country that receives more rain than most, the preponderance of decking and its handmaiden — the top of the range barbeque and grill — verges on the delusional.
Nonetheless, go to any Woodies DIY shop on a Sunday morning and there you can see the Deckmen of Deckland, comparing barbeques and decks.
Up until very recently, the conveyor belt of rising house prices whisked Deckland along in an upwardly mobile dream. We were prepared to believe — like Americans — that tomorrow would be a better place than today.
This Hibernian version of the US’s manifest destiny is now under threat. And the reason is simple: outlying areas get hammered in property downturns.
In the UK for example, the commuting region of East Anglia saw falls in property prices of 40pc in the last slump, whereas in the borough of Kensington & Chelsea, overall average property prices did not fall at all.
This week, the Irish media is obsessed with the US election, however something much more pedestrian should be catching our attention.
An article in this month’s Atlantic magazine shows what might happen to Deckland in the years ahead.
In the US, like Ireland in the past few years, unlimited credit led to an explosion of building in the outer suburbs.
As long as prices were rising and petrol was cheap, a nice house in the suburbs was an asset; today it is fast becoming a liability.
Today, America’s suburbs are experiencing a huge increase in foreclosures as the mathematics of paying huge mortgages begins to overwhelm families who up until recently looked not only comfortable but wealthy.
As the Atlantic states, “Many areas of go-go growth — the southwest, California’s central valley, much of Florida, eastern Colorado and greater Atlanta — have been hardest hit”. All these areas are the new commuter-belt.
Ireland’s commuter belt — Deckland — is experiencing something similar. However, we are probably a year or two behind the US.
The Federal Reserve has acted to ease the burden on the average US homeowner by cutting interest rates aggressively.
Unfortunately, for the sellers in Hopkins Haven, our interest rates are determined by a haughty Frenchman, living in Germany, who doesn’t give a monkey’s about Monasterevin. And, worse still, no one back home has the courage or honesty of the Ryanair management to call a spade a spade.
Good article. I have one question though? Since the property market is in a downturn and activity is slowing to a standstill wouldn’t it be better for all (estate agents, banks, builders, buyers and sellers) to just admit that certain houses are worth 30-40% less and then return to more normal buying, selling and building activity? Or is it better to have a long, drawn out fall in value with a dead market and low activity for a long time? I suspect the former and if so then anybody who’s talking up the housing market is ultimately shooting themselves and… Read more »
Could not agree more. O’Leary and Co are very smart and savvy. They totally seize the initiative and set the agenda (and they know no other Airline CEO could likewise do and say what he says and does) He also knows that his competitors are probably not as nimble or prepared as Ryanair is going into a downturn due to their bloated and inflexible business models or national shackles. Furthermore,he sets the markets expectations low giving himself more leeway and he also takes the wind out of the analyst community sails (to a certain degree). All that and yet he… Read more »
Does anyone think that certain senior civil servants/politicians should be given the boot and replaced with savvy capitalist tycoons? Would they not just try and get as much tax revenue in as possible from anywhere or would they focus more on home-grown industries? If Mr.O’leary were minister for enterprise would he help Irish entrepreneurs set up their own Viagra and false breast factories? We can throw ideas around all we want, it’s competitiveness that’s holding us back as players in the global market. Nick, all due respect I would’nt want any of the names you mentioned running the country.They talk… Read more »
The use of the RBK&C as an example is not a good one, it will have a stable market in the same way that Ballsbridge will have one. Both are desirable and relatively small, with a population that it inured with money. Some may feel a pinch, in as far that Â£40,000 for a month during winter in Barbados will continue, but they will now fly first class rather that the usual air taxi. Your main point on Ryanair is correct, realistic, and have thought so when they started flying. But much like that cook Ramsay there is a bit… Read more »
We all now are supposed to give Ryanair praise and laud their honesty, admire thier business success and say well done with their â‚¬300m+ plus last year . I say they are as crooked as the banks , estate agents and the rest of the gangsters who are in power in this country. How do they make a lot of money ? By working their people to the bone with shit wages and bad working conditions. They also compromise the safety of the travelling public and other aircraft by their lack of sufficent training for the staff ,pushing pilots to… Read more »
If you ever sat on a bus or traffic for any length of time, Jim, then saving yourself 800-1000 euro -1990 prices- for flying to/near London or Paris on Ryanair would not matter that much. There is nothing stopping you from going to Weston if that is what you can manage.
Who the hell cares if for at most three hours, you end up at the far end of Europe, that you are moved like cattle. And when they cop on that they are not taxmen or bill collectors for airports, things will seem better.
I agree. Ryanair, for all its faults, is a great business and suceeds at the one thing it’s legally mandated to do which is return value to it’s shareholders. It should be applauded for being one of the few homegrown champions especially in such a competative industry. We need to encourage more companies like this rather than becoming a landing strip for US companies in Europe (as profitable as that has admiteddly been in the past).
It’ll be interesting to see what happens to Ryanair, given that, I believe, it’s business model is fundamentally based on retail. I’ve got so used to hopping around Europe.
Ryanair airplanes landing faster than other aircraft at EIDW? Where do people come up with these outrageous statements! I suggest you get your hands on a Boeing FCOM, and perhaps you will be guided towards the truth. . . . . .
The Better Man
When you’ve done well being candid/honest is easier than when youve screwed up. Fair play to Ryanair, they have made some brave calls, and gotten perhaps all of them right. Management know well enough that they are doing a great job for their shareholders, no other management or parent company could make a significant improvement. Equally they know tough times are ahead and are making sure people know, so they wont be operating under false expectations from shareholders next year…… smart move…. Theres a lot of companies that have the worse issues; Sure where are the shareholders going to put… Read more »
The property market is in decline all right but there are a few important things to note: Re Dublin prices will fall v little in the so-called exclusive areas and even if they do a Dalkey house quoting at 5 million may now be 3 million, i.e. v little use to most of the population. House prices that really fall will be in commuter belts and hence the areas that are most desired/useful will not see much of a fall. In addition there is too much wealth generated in certain areas for a need to sell off property, i.e. many… Read more »
Rents are a direct function of income and therefore have probably reached a ceiling already. You cannot mortgage this over 40 years with an intro teaser rate – its based directly on net income affordability (for a change). Landlords can ask what they want but the rents actually achieved do have threshold values. Besides, try and price people out of the rental market and they will leave the country – because they can – simple as that!
I agree with DM its high time we shook ourselves and see the wood for the trees,till the ice melts , and the skys go grey , lets make more money boys and girls!
Some areas are immune to recessionary forces, RBKC being perhaps the most extreme example of ‘The Rich Will Always Be With Us’. # There’s was a Thatcherite Tory M.P who disparaged someone for being ‘nouveau riche’ by saying “he’s the type who has to buy his own furniture rather than inherit it”. He shagged everyone he could get his hands on but his name escapes me. Wrote it all in unexpurgated memoirs…..oh dear, incipient Alzheimer’s at 47! Anyway: Isn’t there a difference between the traditional ‘suburbia’ that so horrified Betjeman and the cancerous ‘exurbia’ of today? Presumably traditional ‘suburbia’ with… Read more »
Re rents, if check the statistics, rents didn’t increase in dublin for about 4 years and in fact in relative terms decreased. If anything as prospective buyers defer purchasing they add to numbers renting. Rents are now playing catch-up if anything.
Re rents (final word I promise!), there are those that think rents have to catch up with these over inflated housing values (in terms of monthly costs) – whereas I actually believe that the opposite is the case – housing costs have to realign ‘down’ to rents. Then and only then will there be an equilibrium.
Yeah, housing costs will come down and that will ease the pressure on rents. Its an interesting dynamic between the two sectors, although its not completely straightforward. For example house prices may decrease in the outer suburbs but i believe this will have little or no effect on say rents in the city centre. People will pay a higher rent to live near the centre of town and as commuter costs rise this will only make living near centres more attractive. The outer suburbs, without adequate facilities, will take a long time to recover any sort of saleable value. Don’t… Read more »
Take a look at
for real evidence of rental price drops (some increases I agree) but the overwhelming evidence indicates that rents have peaked.
It’s a simple question of affordability (and of course supply).
” Don’t forget, they are not making any more land to build on in the city centre, whereas a city can always expands outwards. My best guess is that rents will continue to increase (in city centres) at a steady rate for the forseeable future. In fact as banks tighten their lending policies this will further pressurise rents to climb.” they are making new land in the docklands. rents in the city centre did not increase for more than half a decade from 2000-2007, and then a very minor correction was achieved as landlords assumed they could pass on interest… Read more »
Good point Jonathan. However I do think estate agents are currently hanging on by the skin of their teeth as most base their commission on percentages rather than fixed fees. So they have a vested interest in talking up prices. The reality is that most of their market has dissipated: with a 20% vacancy rate, it would appear that market saturation may have occured. Secondly, any potential secondary market of lower earning, but desperate to buy would-be homeowners are shut out of the market by higher interest rates and fears of risky lending. It was fine to give Jane on… Read more »
Hi David, Thanks for another insightful article. In seeing some of the posts here it seems that, along with many of the prior posts on other articles, the focus is on property. I have not lived in Ireland now for about 5 years, but I visit from the states about twice a year. I spent most of my life in and around dublin up to that point. What I find remarkable in the comments made above is the belief that the city centre will be spared any ill effects in a housing downturn. I certainly agree that the poor areas… Read more »
Wouldn’t we all love to see the oil prices fall… ïŠ
And how likely is that to happen? We are on $100 today again. It is true that $ is not worth much to us, but $100 and growing is a real problem…
Ivan | http://www.SeoConsultant.ie