May 13, 2016 / 9:53 AM / 2 years ago

Ryanair would cut investment in UK if it leaves EU

DUBLIN (Reuters) - Ryanair (RYA.I) would withdraw some investment if Britain opts to leave the EU and air fares could fall in the short term due to the “extreme volatility” such a vote would generate, chief executive Michael O’Leary said on Friday.

Ryanair Chief Executive Officer Michael O'Leary attends a Ryanair press conference in Dublin, Ireland April 12, 2016. REUTERS/Clodagh Kilcoyne

The Irish low-cost airline, Europe’s largest by passenger numbers, flies 40 million of its 100 million-plus passengers a year to and from the United Kingdom and has its largest hub at London’s Stansted Airport.

It was the liberalisation of Europe’s skies two decades ago that allowed airlines to fly unrestricted between countries and which helped low-cost airlines such as Ryanair and easyJet (EZJ.L) to grow rapidly.

O’Leary is one of the most vocal business leaders urging voters to back continued European Union membership in a June 23 referendum.

“After 9/11, after every crisis Ryanair is selling cheaper fares, we keep people flying. So the fact is it would have a downward effect on our pricing for six to 12 months, but we will keep people flying,” O’Leary told reporters.

“The longer-term effect though is we will invest less in the UK, we will certainly switch some of our existing UK investment into other European counties because we want to continue to invest in the European Union and it will be bad for air travel and British tourism.”

James Stamp, UK head of transport at KPMG, said one of the concerns over a potential Brexit was that it could put people off investing in bases and airlines in the UK while the UK renegotiates trade and traffic agreements.

In addition, EU laws on free movement of labour give low-cost airlines greater flexibility in moving around staff and aircraft.

“However, change brings opportunity and low cost airlines have always been able to capitalise on that,” Stamp added.

For example, O’Leary said a Brexit may put some downward pressure on aircraft prices and there is always an opportunity for Ryanair to stock up in such a downturn, though its current supply of Boeing (BA.N) planes covers it to 2023.

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Rival airline boss Carolyn McCall of Britain’s easyJet has also backed EU membership, saying it helps keep fares down.

“Consumers have benefited greatly from deregulation and from lower prices and from a massive expansion of routes,” McCall said earlier this week after easyJet reported results.

British air fares could rise sharply in the longer term if a vote to leave threatened Britain’s access to EU air services agreements, O’Leary said.

However, he said the “Remain” campaign should be cautious about “apocalyptic scenarios”. While extraordinary volatility would undoubtedly follow for six to 12 months after a Brexit, fundamental economics would then take over and sterling would recover, O’Leary said.

Ryanair is spending around 25,000 euros (19,840 pounds) on advertisements calling on its customers to vote to stay in the EU, he said, and would step up that marketing drive closer to the referendum date.

“Most of the contribution being made by Ryanair is through our email, our customer base, advocating a remain vote because we fundamentally believe it’s in the UK’s best interests to remain in Europe,” O’Leary said.

“Will Ryanair have any effect? I think not really. Around the margins, we may.”

Additional reporting by Victoria Bryan in Frankfurt; Editing by Michael Holden and Ruth Pitchford

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