February 5, 2020 / 1:07 PM / 14 days ago

Breakingviews - Ryanair’s budget can stretch to truer green boasts

A Ryanair Boeing 737-800 plane takes off at the Riga International Airport, Latvia March 15, 2019.

LONDON (Reuters Breakingviews) - Ryanair Chief Executive Michael O’Leary’s big mouth may be coming back to bite him. Britain’s advertising watchdog has called out the budget carrier over its claims to be Europe’s greenest airline. That’s only true because it has newer planes and crams in more people. In absolute terms, it’s a massive polluter. Yet the group’s juicy margins mean it doesn’t need to be a laggard in fighting climate change.

To date, O’Leary has done little to fend off the threat of activists like Sweden’s Greta Thunberg, who are calling on passengers to avoid flying through so-called flight shaming. Last year, rival easyJet pledged 25 million pounds a year to compensate for its emissions via offsetting measures such as planting trees. By contrast, 17.5 billion euro Ryanair merely asks its customers to make voluntary contributions to miscellaneous causes including, bizarrely, Irish whale-spotting. Since 2018, when the scheme started, passengers have coughed up 2.5 million euros.

O’Leary’s second line of defence against Thunberg – advertising spin – is barely more credible. Yes, it’s true, as its ads trumpet, that carbon dioxide emissions for every kilometre flown by every passenger have dropped 18% to 67 grams in the last decade. And yes, it’s true that that puts it at the front of the European airline pack. But total emissions increased by half from 2013 to 2018, to 9.9 million tonnes, as passenger numbers soared. That puts it in the top 10 of European carbon dioxide emitters, according to lobby group Transport & Environment. The other nine are all power stations.

Ryanair was unrepentant over the ads, but it can’t afford to be nonchalant. EasyJet reckons its move to offset emissions is already steering business its way.

O’Leary can easily play catchup. Matching easyJet’s pledge to offset all carbon emissions would cost Ryanair 29 million pounds. Yet the Irish group’s greater efficiency – its operating margin was 16% last year, more than double easyJet’s 7% – means that would only equate to a 3% hit to this year’s net income, which analysts expect to reach 1.05 billion euros, according to Refinitiv. That’s roughly half the 6% blow taken by easyJet. True, such a move might make it harder for O’Leary to get his 99 million euro bonus, which is contingent on net income hitting 2 billion euros by 2025. Yet he stands a better chance of getting it by keeping his passengers.

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