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Quest Means Business
Ryanair CEO Wants to Drive Down Cost of Air Travel in Europe; Air France-KLM CEO Says No Choice But to Raise Ticket Prices; Lufthansa CEO Claims Iran Crisis a Jolt to European Aviation. Aired 4:00p-5p ET
Aired March 19, 2026 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:12]
RICHARD QUEST, CNN INTERNATIONAL HOST, "QUEST MEANS BUSINESS": Closing bell ringing on Wall Street with a sea of red. We are well off the lows
of the session but as you can see, a lot of losses earlier in the day and we have a packed program for you that's going to take into account
all of the things that have been taking off now, 200 points on the Dow, bring us to a close, sir, one and a two and a one two, three, four.
Trading is over. We are down. Those are the markets and these are the main events of the day.
The U.S. has urged Israel not to attack Iranian gas fields after Israel said it acted alone. Tonight, we are one on one with Europe's top
airline chief execs, it is about rising fuel prices which are hurting transatlantic higher fares, and the WTO, the World Trade Organization
now says conflict in the Middle East is putting pressure on food supplies. The Director General, Ngozi Okonjo-Iweala is with me tonight
live on this program because we are live in London now. It is Thursday, it is March the 19th. I am Richard Quest and I mean business.
Good evening. The conflict in the Gulf has plunged the aviation industry into deep crisis. Carriers are grappling with disrupted airspace. Demand
is falling and jet fuel is absolutely soaring, doubling in many cases. I have just returned from Brussels this afternoon where CEOs and aviation
bosses gathered for their annual Airlines for Europe, A4E conference, and they are discussing the crisis.
So on this program tonight, you're going to hear from the Director General of IATA, International Air Transport Association. You'll hear
the chief execs of Ryanair, Air France-KLM and Lufthansa. They are split on whether higher jet fuel prices is going to translate into higher
fares and how for travelers.
(BEGIN VIDEOTAPE)
WILLIE WALSH, DIRECTOR GENERAL, INTERNATIONAL AIR TRANSPORT ASSOCIATION: It is inevitable that prices will increase.
BENJAMIN SMITH, CEO, AIR-FRANCE KLM: We have no choice but to raise our ticket prices, and that, of course, gets passed on to customers.
KENTON JARVIS CEO, EASYJET: It is not just the price of a barrel of oil, it is also the refining costs that have gone up to convert it into jet
fuel.
CARSTEN SPOHR, CEO, LUFTHANSA GROUP: A fuel price increase of that magnitude will reflect itself in prices and fares. Absolutely.
TONY FERNANDES, CEO, CAPITAL A: We obviously have to adjust our fuel surcharges. There are three ways of dealing with this. One is playing
around with the revenue from ancillary income and fare and the second is looking at cost cutting.
MICHAEL O'LEARY, CEO, RYANAIR: In Ryanair, we don't think we have to hide anything. We are very well-hedged.
JOSCEF VARADI, CEO, WIZZ AIR: We have never done fuel surcharge and we will never do fuel surcharge. I don't think it works.
(END VIDEO CLIP)
QUEST: There you go. You've got the different opinions there, but let's -- before we look at the effects, let's go to the cause.
The major escalation in the war. In the past few hours, Iranian ballistic missiles have struck a key refinery in Northern Israel and
that followed attacks in Qatar and across the Middle East.
Tehran is retaliating after Israel hit Iranian facilities in the South Pars gas field, the largest in the world. It is sending shocks through
the global energy market. Brent spiked and then pulled back, the global oil hit $115.00 at one point, and bearing in mind, that's always, you
know -- the risk is always it goes there again and stays there.
The other benchmark WTI, West Texas also jumped and slipped back just a tad.
There are contradicting claims about whether the U.S. knew about Israel's plans to strike the South Pars gas field. Now, according to
some sources to us, Washington was aware, despite President Trump saying he knew nothing about it.
In any event, is the Israeli Prime Minister in the last hour, said the country Israel, acted alone.
(BEGIN VIDEO CLIP)
BENJAMIN NETANYAHU, ISRAELI PRIME MINISTER: I will say two things. Fact number one, Israel acted alone against the Islaweia gas compound.
Fact number two, President Trump asked us to hold off on future attacks, and we are holding out.
(END VIDEO CLIP)
QUEST: Saudi Arabia says it could strike back if Iran, after Tehran stepped up its attacks.
Nic Robertson is in Riyadh.
Nic, does it matter whether the U.S. knew or not? Are we going down a rabbit hole on this one? I mean, at the end of the day, Israel struck
and whether the Americans knew or not, they have said, don't do it again.
[16:05:03]
NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: Look, the calculation is in Tehran right now. What move do they make next? It is
very clear that after Israel did strike that field they did decide to in a calculated and planned way to go up their escalation ladder,
indicating that they had the ability to do that and I say that because they hit oil facilities around Riyadh, they hit the gas facilities in
Qatar, they've hit oil facilities on the West Coast of Saudi Arabia in SAMREF, he oil refinery there, the oil refinery was hit by a drone
that's on the Red Sea. That's on the other side of Saudi Arabia that hasn't been targeted before, a ballistic missile was intercepted flying
in the direction of the Yanbu oil terminal facility where the oil goes aboard ships in the Red Sea for export.
This is Saudi Arabia's long term plan to get around the Strait of Hormuz, to be able to pump oil across the country and get it out through
the Red Sea. So Iran was upping the ante by targeting there, targeting Haifa.
Now you have Prime Minister Netanyahu saying they acted alone, as you say, perhaps that's not important. The second thing he said, President
Trump asked me not to do it again. So, the calculus now has to be in Tehran, do they trust the Israeli Prime Minister? Do they trust what
President Trump has been saying about this?
I don't think they trust anyone outside of their own leadership circles at the moment. But how will they act? Would they decide to continue up
the escalation ladder? That's the million dollar well, multi-billion dollar oil barrel gas revenue question at the moment, Richard, it
absolutely is, what Iran does tonight.
QUEST: Okay, so I agree the attacks are exceptionally serious, but even the threat of future attacks will keep the Strait closed or will keep
prices relatively high. The threat -- I mean, obviously the attack is worse, but the threat can do a lot of damage in its own right.
ROBERTSON: Absolutely! The Strait of Hormuz are going to remain closed in the immediate term because there isn't a plan to open them. There
isn't the military hardware in place to do it, it is not an easy task every military expert that talks about how to do it lays out a difficult
procedure.
We learned -- we heard from the head of CENTCOM today, General Dan Caine, laying out, you know technically how you work in this battle
space, so nothing happens quickly. It has to be pre-planned, pre- prepared part of the U.S. Navy that's in the region has gone back to a port in Cyprus, I believe it is, or certainly in the Mediterranean for
repair.
So the U.S. is not at full strength so yes, the Strait of Hormuz remains closed. The question is does the Red Sea export facility get shut down?
The question is how much long term damage will Iran like it did with the LNG in Qatar today get shut down? How much will that affect oil prices?
And this is something you'll be able to calculate much better than me, Richard.
But the more of the equipment that you smash here, the longer it takes to repair it, but in the short term, yes, as you say, the Strait is
closed.
QUEST: Nic, I am grateful. Thank you. That very point that Nic Robertson is talking about, natural gas prices have been surging with benchmark
prices rising in Europe, about 17 percent.
The Iranian attacks, 17 percent of Qatar's LNG export capacity is gone and Qatar Energy says it is shutting down production for the time being.
Eleni Giokos is our expert on energy in Dubai.
Eleni, factor all of this in, please.
The prices are going up that much we know, so where does it go next?
ELENI GIOKOS, CNN INTERNATIONAL HOST AND CORRESPONDENT: Yes, where does it go next? I think there is -- okay, so we spoke about the Strait of
Hormuz. We know that 20 million barrels of oil is taken out of the market because of the shutdown there. What we don't actually know is the
damage to the critical energy infrastructure across the gulf region and since the beginning of the war, we have seen targeted strikes in Oman at
Duqm Port. We've seen here in the UAE, ADNOC. We've seen, you know, not only gas fields, but refinery. We've seen Fujairah Oil Terminal, the
largest storage facility of its kind in the Middle East.
We've seen Bahrain. We are talking about Qatar, Saudi. I mean, there are so many strikes that have occurred, but the last 24 hours have been
actually very consequential because we heard from Qatar Energy CEO in an exclusive interview with Reuters and for the first time, Richard, we
have an understanding of the kind of damage to critical energy infrastructure, he says that 17 percent of capacity has been wiped off
because of Iranian strikes.
That's a $20 billion loss and we are talking about five years of declaring force majeure on those long term contracts. It is going to
take them five years to build that back.
[16:10:10]
Now, if I look at some of the images that we have been covering through the start of the war, the fire, the smoke on that critical energy
infrastructure, one can make the assumption that there is damage made. We don't have the information. No one has really spoken about what it
fundamentally means in the long term.
But make no mistake, we are not only talking about supply disruption through the Strait, we are talking about supply destruction at this
point.
QUEST: Okay, so I mean, it is just difficult to get a handle on this because each -- we've seen the size of the ships. We've seen the Strait
is closed. We've seen that these attacks keep going on, like for example in Qatar and yet, the -- and we are looking now on the screen at the
number of attacks that have taken place.
In the absence of any form of negotiation or any form of understanding that they won't continue, there is no reason for prices to drop.
GIOKOS: There is no reason at all. All the analysts, all the experts, all the economists I have been talking to say the worst is still to come
because were grossly underestimating the impact on critical energy infrastructure and Iran has been using this lever since the start of the
war.
I know that they say they are going to be retaliating because the South Pars field was struck by Israel. But frankly, they have been targeting
energy deliberately to ensure that there is economic pain felt I think, around the world. So where prices go? I mean, we are hearing between
$120.00, $150.00. The Iranians are saying $200.00. I mean, who knows at this point.
But the long term damage really depends on how long this war will last, but the damage is already done. I mean, we are going to feel pain and we
are going to have inflation that's going to hit all parts of the world.
QUEST: Eleni, I am grateful. Eleni Giokos who is in Dubai, thank you.
The soaring energy prices are presenting a huge challenge for the world's airlines. Jet fuel has nearly doubled since this time last
month. One CEO told me today, I was just saying -- I said, how much are you paying at the moment? He says $1,700.00. I said, well, how does that
compare to last week? He said, $700.00.
So in that environment, you can see exactly who on earth can compete on that. The Director General of IATA, Willie Walsh told me the aviation
industry is facing this unknown, much like it did during COVID.
Willie Walsh said, it is about the adjustments that the airlines will have to meet to accommodate this and lack of routes and all those sort
of things and who will, in the end be footing the bill.
(BEGIN VIDEOTAPE)
WALSH: You do need to give incredible credit to Emirates, for example, who I think have done an outstanding job in getting flights up and
running to repatriate people.
I think they get up to about 60 percent of their pre-war levels of capacity. It has been fluctuating because of the intermittent attacks.
So, it is an incredibly difficult, but always safe.
QUEST: We look at the flight radar and you can see the donut. I mean, it is quite dramatic how you can see everybody going around.
What are the, not safety, but in terms of flight times and fuel used, what is the implications of that?
WALSH: Well, you know, we've already had to deal with the closure of Russian Airspace and the closure of some airspace in the region. So it
is very complex and it is adding to complexity that was there pre this war.
So most airlines have either reallocated assets that would have gone into the region or bypassed the region to other parts of their network
because there is still strong demand.
And I think you would have heard most of the European airline CEOs say that, you know, they have shifted capacity away from the Middle East so
they are not even overflying the area to other parts of the world where there is strong demand.
QUEST: Then you end up with the jet fuel problem, doubling, and it may go higher, possibly could go higher.
WALSH: Yes.
QUEST: How bad are the implications?
WALSH: Yes, it is a serious challenge. A lot of the European carriers are hedged, certainly in the short to medium term, but if you go back to
the sort of fundamental economics of the industry, we say fuel is going to average about 27 percent of the cost base. It is slightly lower than
labor costs this year. Fuel is normally the number one.
So if you've got a doubling of jet fuel, you've got a doubling of the cost. So instead of 27 percent, it is up over 50 percent of the cost
base. So, it is inevitable that prices will increase.
Net margins for the industry around four percent, there is no way the industry can absorb this, so pricing will have -- ticket pricing will
have to go up, and it will depend on a number of factors. And you've already seen some airlines adjust pricing.
[16:15:02]
QUEST: Even if ticket prices go up, they cannot go up by the full amount of that. So, would you expect to see the industry move into loss this
next year?
WALSH: I think it is still too early to call because obviously you know, you've had two months of performance where there was little or no
disruption. We've so far had a little bit less than one month of disruption.
If you look at the forward curve for fuel, you can still go out and hedge, you know, six, nine months out at prices that are significantly
lower than the spot price today and I think airlines will look at that, take some comfort from the fact that the market believes prices are
going to come down.
I don't think they're going to hedge at those prices today. So there will be early pricing action. And you will see airlines pass on
increases because they are facing immediate increases in their costs.
QUEST: Besides calling for peace and for sort of stability, what else is IATA calling for in terms of aid and assistance to the industry?
WALSH: Well, you know, we are always reluctant to say that people should provide financial support to the industry. I think what we do need,
though is a serious look at the allocation of refined products because, you know typically jet is about nine -- eight-nine percent of the output
of a refinery. There has been more disruption to the jet refining because of the amount of refining that was done in the region.
So we are facing, you know, some issues there and you could argue that maybe this is a case for there being a strategic reserve of jet fuel,
not just a strategic reserve of crude because you know, we will face, I think, shortages in certain parts of the market.
QUEST: You do think that there will be, if this continues, that's the if, there will be shortages of jet fuel.
WALSH: Yes.
QUEST: Where and how?
WALSH: Yes, there will definitely be shortages of jet fuel, and already you've seen some airlines say that they are probably going to pare back
their schedule in anticipation of having lower supply of jet fuel.
I think, the impact on Asia and Europe but it will impact on every part of the world.
Now, the opposite side to that is, of course, the Gulf carriers are using less jet fuel. So there will be some surplus supply. The question
is how is that going to be reallocated?
QUEST: When will you push the big red button that says crisis for the industry as a result of this war?
WALSH: Yes. I am sort of reminded of the things we were saying back in the COVID period. You know, this will all be over in a few weeks. No
need to panic. Everybody should relax and I think that is pretty much the same message that is out there at the moment. Nobody knows Richard.
(END VIDEOTAPE)
QUEST: Nobody knows.
So we are all making the best guesses that we possibly can.
Airlines aren't the only businesses facing those disruptions. The World Trade Organization, the WTO has put out a new report showing how the
conflict -- and there she is -- the Director General will be with us, Ngozi Okonjo-Iweala. Stay where you are, ma'am. We will be with you
after the break.
QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
[16:20:39]
QUEST: Willie Walsh says the knowns are uncertain, well, think about it. You've got spiking energy prices, disruption of supplies of fertilizer,
agriculture. The war could and will shave off a sizeable chunk of global growth with trade.
That is the warning from the WTO in its latest output. The World Trade Organization's forecast, a large drop in global trade and growth this
year, and it will be knocked down even further because of what is happening.
However, a sustained A.I. boom could drive growth. The WTO says it remains to be seen which of these scenarios will play out.
Ngozi Okonjo-Iweala is the Director-General joins me now. Good to see you, D.G.
Let's just first of all -- I mean, it is the level of uncertainty and the risk of things like fertilizers not being delivered, food shortages,
food insecurity, these will really take a toll.
NGOZI OKONJU-IWEALA, DIRECTOR-GENERAL, WORLD TRADE ORGANIZATION: Yes, Richard, I definitely agree with you. If you if you ask me, the one
thing I am worried about with the present situation in the Middle East is the impact on food and fertilizer prices.
I know energy is very important, but you know, any impact of a high rise in food prices will really hit for poor people all over the world and if
you think of the fact that one-third of the world's fertilizer passes through the Strait, mostly urea, you have big agricultural producing
countries like Thailand, 70 percent dependent on the Gulf for the urea supplies. I think India, about 40 percent, Brazil, about 35 percent, so
difficulties getting the fertilizer to these countries on time will definitely have an impact on food prices.
QUEST: And that's before we factor in, for instance, just the sheer cost of extra fuel, jet aviation fuel. The cost, for example, of cargo, air
cargo and all of these things. I mean, how bad do you think it is going to be for global world trade?
OKONJU-IWEALA: Well, right now, we are forecasting a modest 1.9 percent growth this year. This is off of the back of very strong growth for 2025
of 4.6 percent.
You know that growth came off the back of front loading and A.I. -- trading A.I. goods, so 1.9 percent this year, but we are saying that
should this conflict continue in the Middle East, it could shave off 0.5 percentage points off of goods' trade growth this year. And don't forget
services -- growth in services trade also could have an impact.
QUEST: There is very little anybody can do about this, isn't there? I mean, we are right to be warned about it. But I guess my core question
would be what do we do about it?
OKONJU-IWEALA: Well, I mean, Richard, nobody -- there is so much uncertainty about how long this conflict will last. We are all hoping
that it will end, that's the best answer because remember, in the Gulf itself, imports a huge part of its food supplies. It is a net food
importing region, 75 percent of their supplies of rice, for instance, come from outside the region.
And so, it would even impact those countries even more. So we may need to think of a special arrangement to allow at least fertilizer and food
supplies to pass through the Strait.
QUEST: Are you --
OKONJU-IWEALA: That would be the answer.
QUEST: Now, hang on a second. Hang on a second. You've just teased out something. Are you suggesting that you might be using your good offices
to try and broker some sort of agreement that would allow fertilizer or would allow or do you see -- do you see a role for yourself to do that?
OKONJU-IWEALA: No. I would think that, you know, we've got the Secretary General of the United Nations who could do that. We've got others, you
know, of course, we are happy to be part of any discussion, such discussions from the WTO. But I think there are others who are better
placed to lead this effort.
[16:25:08]
QUEST: One thing I want to point out, in your press release, it says this morning World Trade is set to slow, yes, on the back of surging
trade in A.I. enabling products.
I mean, I spent some time trying to work out what that meant. Is this because all the chips and all the things that are being used in A.I. is
actually a savior here.
OKONJU-IWEALA: Absolutely, Richard.
We found in in 2025, for instance, that the impact of the tariffs was actually masked by the big boom in trade in A.I.-related goods. And, you
know, we have an agreement here in the WTO. It is called Information Technology Agreement that actually allows for zero tariffs on these
goods.
So there has been a boom and trade in A.I. goods contributed 42 percent of trade of merchandise trade growth last year. So, if we continue in
2026, we think it will decelerate by the way. But if it continues, it could provide a potential upside to the more gloomy picture we have with
the conflict in the Gulf.
QUEST: Good to see you, Director General. I am always grateful. Thank you for staying late and talking to us tonight. I am grateful. Thank
you.
Now, as we continue tonight, world trade on Most Favored Nation Status and the Bank of England and the European Central Bank both delivered
rate decisions today. While both Central Banks kept rates steady, they warned the energy crisis in the Middle East could drive up inflation if
the war and oil shocks persist.
They could also open the door to future rate hikes. In fact, Anna Cooban, I believe that in the discussions at the FOMC yesterday, there
were even murmurings that the next move might be higher. We've had the RBA in Australia higher. I mean, it is not out of the realms.
ANNA COOBAN, CNN BUSINESS AND ECONOMICS REPORTER: Well, JPMorgan is predicting a couple of rate hikes in the next few months and so we
really are in a different position to a few months ago, Richard, where we are staring down the barrel of a resurgence in inflation. Now, what I
think what is particularly interesting from the ECB is Lagarde is sort of talking about how the elephant in the room here is Russia's invasion
of Ukraine four years ago, we saw similar rises in energy and oil and gas.
But actually, we were in a different position back then because if you remember, inflation was already rising after the pandemic, supply chain
issues. That wasn't really the case. But before this, we were at relatively low levels compared with what we had a few years ago.
But if this is and she mentioned the intensity and the duration, if this is to persist, and we've seen the intensity massively increase with
these attacks on infrastructure in the past day or so, then we could see some real medium to long term uptick in inflation.
QUEST: Right. And so, at the moment, it is still wait and see. But again, at the FOMC, apparently somebody counted, Powell used the word
uncertain seven times and that shows -- and you just heard the D.G. of the WTO, uncertain, so what do you do in uncertain times if you're a
Central Bank?
COOBAN: Well, the Bank of England, what had been expected was a rate cut. And so they've held it steady, and so what they are doing is they
are biding their time to wait and see the data as it feeds through. There is more of a lag with gas prices on household prices than it is
with oil, for example.
I will point to Europe. It is about to refill its stores. It is going to the storage refilling season with gas prices as high as they are. That
could mean that if they buy the gas now in storage, that people are paying higher prices for that gas once it is sold later in the year, in
the coming winter.
QUEST: Okay, but now, what -- I was -- and yesterday, I was on the train going to Brussels and this professor chap who I met on the train, an
economist, he said it is all about how long it lasts. And he said, if it lasts more than another month, we are in deep trouble. Is that what the
Central Banks are saying/
COOBAN: They are not being very specific. They are saying that if --
QUEST: They are hedging.
COOBAN: They are hedging, yes. They are hedging, but you know, I mean, talking to oil traders over the past few days, they are now really
foreseeing this lasting months, not weeks. And the fact that we have seen this infrastructure being attacked, that therefore necessarily
means that this crisis will go on for longer, even if the war stops because those facilities will need to be repaired. They can't just be
switched back on.
QUEST: We will be watching inflation numbers, no doubt. I am grateful for you. Thank you very much for staying late tonight.
Now, we've been discussing how rising jet fuel costs are constraining major airlines. Ryanair's chief executive, Michael told me he has got a
bigger problem. It is E.U. regulation, Michael O'Leary, always good value after the break.
(COMMERCIAL BREAK)
[16:33:03]
QUEST: We are halfway through QUEST MEANS BUSINESS but by jingo, we've got a lot more to do.
Ryanair's Michael O'Leary tells me Ryanair was well-prepared for the spike in fuel costs, and the CEO of Air France-KLM, Ben Smith, the
pressure has been a wakeup call.
We'll get to them only after the news because here the news always comes first.
The energy markets are once again rattled by the tit-for-tat attacks on oil and liquid natural gas LNG infrastructure in the Gulf. Prices for
both jumped after the Israeli strike on the South Pars gas field and Iran's counterattack on the world's largest LNG facility in Qatar.
Japan's prime minister Sanae Takaichi has met President Trump at the White House. The president said he's pleased with the level of support
he's received from Japan over the war. The prime minister said she had specific proposals which could calm markets. Japan imports more than 90
percent of its crude oil from the Middle East.
The American college student missing in Spain since early Tuesday has been found dead. 20-year-old James Gracey, a junior at the University of
Alabama, was last seen during the overnight hours of Tuesday. Authorities say his body was found along a stretch of beach not far from
a nightclub, where he got separated from friends. A spokesman for the Barcelona law enforcement tells us Gracey's death appears to have been
an accident.
Soaring oil prices are driving up jet fuel costs. Ryanair, though, isn't worried. The CEO says they've hedged for the year. But one of the things
Ryanair and all the CEOs are worried about is competitiveness of European aviation.
[16:35:00]
Michael O'Leary claims the bloc is shooting itself in both feet with two and the new rules. First, it's called European trading scheme or system.
The ETS, the emissions trading system. It's all about capping greenhouse gas emissions. But here's the problem. European airlines, when flying
intra-Europe, pay ETS. So if you're going from Belgium to Tenerife, you will pay, I don't know, I think the number that they all talk about,
it's roughly a family of four, you will pay an extra $140 charge.
However, if you decide to go next door and go from Belgium to Morocco, you pay zero. Why? Because it's not intra-Europe. And as a result,
countries like Spain are furious that this rule is doing it. It's even worse of course if you're looking to go long haul. Similar sort of
things because of ETS and the E.U. SAF mandate. They must use a certain amount of sustainable aviation fuel.
Let's take the example, our old friend from Nice via Paris or Frankfurt to Tokyo. If you're flying somewhere, then you pay the ETS scheme here
and the SAF mandate. However, should you decide to go via the Gulf, if you could, or via Istanbul, you pay nothing once again.
The regulations, they say, simply disadvantage European carriers. It is a classic case of Europe killing its own industry.
Michael O'Leary told me Ryanair was well-prepared for the fuel costs but this is something different.
(BEGIN VIDEOTAPE)
MICHAEL O'LEARY, CEO, RYANAIR: We're very well-hedged. We're 80 percent hedged at $67 a barrel out to March of 2026 or '27, sorry. So we bought
forward the fuel. As long as the war in Iran finishes in the next month or two, we think fuel prices will fall back sharply. But if the longer
it goes on the greater risk there is to pricing in summer of '27.
QUEST: Do you have to start making decisions about your next hedge yet?
O'LEARY: Well, not yet. I mean, because we're so well-hedged, because we were forward bought out to March '27 really we're looking at kind of
summer of '27. And that's too far away to be.
QUEST: Was that good? Was that hedge good luck or good management?
O'LEARY: Oh, good luck. We have no good management in Ryanair. We're Irish.
QUEST: The way in which the -- you're pulling out of various markets now when you're not happy with airport charges, when you're not happy with
ATC.
O'LEARY: Government taxes.
QUEST: Government taxes. But you're doing it more and more, particularly this year, this last few -- this next season, you've really made a very
big statement.
O'LEARY: I think what's happening, Richard, across Europe is you have so many governments abolishing taxes. You have Sweden abolishing aviation
taxes, the Slovakians, the Albanians, regional Italy. And we want to reward those countries that are abolishing stupid taxes on aviation by
giving them more growth. And to do that, we have to take aircraft away from countries like Germany, Holland, regional Spain, where they're
raising taxes and shooting themselves not in one but in both feet.
QUEST: Where does that end in a sense? Because if you take the U.K. which has got very high taxes in many cases, but you're not pulling back
dramatically.
O'LEARY: No, not in the U.K. at the moment.
QUEST: It seems opportunistic.
O'LEARY: I mean, of course it's opportunistic, but I mean it's opportunistic because you want to reward those countries abolishing
taxes. To me, it's remarkable that Sweden, the home of Greta Thunberg and people who should have spent more time in school learning about the
environment than striking, is abolishing aviation taxes. Five years ago, we were sitting and they were talking about flight shaming.
Now they're abolishing taxes because they realized they want to grow and the only way to grow is lower access costs.
QUEST: When you look at what's happening here in Brussels, I know you -- we will not be able to broadcast some of the language that you would
want to use. I'm aware of that I'm aware of that. But the lack of progress here on things like single European skies, SAF mandates that
just simply will not work, what is the answer for the industry?
O'LEARY: I think there's a fundamental change taking place at the moment. There's a real push from the government, particularly like
governments in Sweden, governments in Italy, now calling for, you know, the abolition of ETS. I mean, the environment, ETS is this taxation on
only intra-E.U. flights, which makes it, you know, massively subsidized non-E.U. travel while the Europeans pay for it all. And we need a level
playing field in environmental taxes. We need to bring ETS in line with CORSIA which is what the non-Europeans pay. But I think --
QUEST: But why won't they do it? This argument has been around as long as you and I have.
O'LEARY: It has. But for, you know, for the last I think five, 10 years, the Greens have been in power in Europe. The Greens have been driving
the agenda. Now they've lost most of their seats in European governments, in the European parliament. Europe is now much more focused
on competitiveness.
[16:40:01]
They suddenly realized that Putin is in Ukraine, Trump is in the White House, and Europe better get its act together. And for the first time I
think in about 10 years, we have a real shot at making air travel in Europe more competitive by abolishing these stupid taxes.
QUEST: OK, so what has to happen, you say? And we're very keen on QUEST MEANS BUSINESS with competitiveness. The Draghi Report, the whole --
O'LEARY: Which has gathered dust for about 18 months here in Europe.
QUEST: They would say they are making progress.
O'LEARY: They are making no progress. Europe just talks about competitive. Draghi has just shown the way. The letter report has shown
the way. But you have Ursula von der Leyen wandering around, dazed, nodding, calling for competitiveness but not doing anything. I mean, for
five years she has done nothing about reforming the ATC. For five years she's done nothing about reducing ETS, which is a scandalous tax on only
intra-E.U. air travel.
I mean, we today, a family of four from Brussels flying to the Canary Islands pay 80 euros of ETS. But if they just switch to Morocco outside
the Europe, zero. So we're taxing the hell out of European travel and tourism and making it cheaper for people to fly to non-European
destinations.
QUEST: To the viewer who's watching and saying, Michael is -- has good green credentials, his aircraft are the most modern, with the best
engines and the best efficiency, but he still doesn't seem to get the green agenda.
O'LEARY: I think because the green agenda, I mean, Putin doesn't get the green agenda. Trump doesn't get the green agenda.
QUEST: Two wrongs don't make a right.
O'LEARY: No, but three wrongs might. You know, we're going to have to wake up here. Europe is going to have to massively increase the amount
of money it spends on defense. That's only going to come from economic growth. And economic growth is only going to come from competitiveness.
So let's stop. We are already investing in new technology aircraft. We're flying aircraft now that burn 50 percent less fuel.
Stop taxing air travel. We need to start encouraging.
QUEST: Finally, I had Joe Varadi on QUEST MEANS BUSINESS last night.
O'LEARY: Never heard of him.
QUEST: He speaks highly of you, too. He is now putting the first row, you know, where you can have an empty seat. It's like a Wizz Class. He's
got them.
O'LEARY: Because they have so many empty seats they make a virtue out of it. In Ryanair, we have no empty seats. We fly with a 94 percent load
factor. We sell every seat.
QUEST: Right. But you could get better yield if you did do a bit of -- for business travelers.
O'LEARY: I think Wizz would actually make a profit if they stop worrying about increasing airfares and copy the Ryanair model, which is we want
to lower the airfares for everybody and we sell seats. We don't keep them empty. I want to drive down the cost of air travel in Europe.
Wizz's failed model is all about keeping empty seats and charging the poor dumb Bobby Witt and the few people they have flying with them
higher fares. Doomed to fail.
QUEST: And finally, how long are you going to keep going?
O'LEARY: Forever. Warren Buffett is my hero. He retired at, what, about 97, 98? We have long miles to go before I sleep and miles to go before I
sleep.
(END VIDEOTAPE)
QUEST: And with that, you could hear the horror within the industry. Michael O'Leary talking to me in Brussels.
Strains on the markets are having a ripple effect on the aviation industry. Chief executive of Air France-KLM on how his group is managing
rising jet fuel costs.
(COMMERCIAL BREAK)
[16:45:45]
QUEST: Supply chain strains sending oil prices through the roof, raising jet fuel costs. Doubling. Air France-KLM says the pressures been a wake-
up call. It shows how much air travel now depends on the Gulf Three, the big Gulf airlines, Etihad, Emirates and Qatar. The chief executive of
Air France-KLM Ben Smith, said he has now to pass those extra costs to his customers.
(BEGIN VIDEOTAPE)
BEN SMITH, CEO, AIR FRANCE-KLM: You know, with fuel up, it's, you know, we have no choice but to raise our ticket prices. And that, of course,
gets passed on to customers. So that is a -- it's not positive for anyone. And then how that's going to impact demand to be seen.
QUEST: You're not flying to the region obviously in that sense.
SMITH: No.
QUEST: And I suspect you won't be for some time. So how do you manage the group then in terms of what you do next?
SMITH: So we have limited exposure to the Gulf because we don't have a level playing field. So the bulk of the capacity to and from the Gulf
operated by Gulf carriers. So the few airplanes that we had destined to those regions are now redeployed nonstop to, you know, to India or to
Asia.
QUEST: Is that where your futures going to be, do you think, growing those routes? Growing longer haul routes?
SMITH: I think it's a new opportunity for us. I think people now will be less inclined to connect over the Gulf so this could be a way for us to
regain some share. Today two-thirds of people to and from Europe going eastbound are traveling via Gulf carriers. So that's less than 50
percent that we're able to access. Huge advantage for these carriers.
QUEST: And I was very taken today in the A-4E discussion away from all the usual stuff about emission trading and what the commission hasn't
done. This is an inflection point on competitiveness and also for sovereignty in terms of European airlines at the moment. What's being
exposed here is something quite different.
SMITH: I think with 600 airplanes grounded in the Middle East and over 100 that were destined to and from Europe, not that those airplanes
aren't operating, I think it's a big wake-up call that shows that Europe is dependent on the Gulf for a lot of eastbound travel, which is I think
a lot of people didn't realize how dependent Europe was.
QUEST: It didn't happen by default, did it? In a sense, the way -- it was the way in which the, or maybe it did. The way in which the Gulf
carriers were able to get such market share in Europe. But now you're saying this is exposing a strategic and significant weakness.
SMITH: Yes, I mean, this is not something new. This started decades ago with liberalized bilateral agreements that were not well-balanced, which
have given, you know, Gulf carriers full access to Europe and European access to markets that didn't exist and still are very limited. So that
was number one. So that's been evolving. And then a lot of other elements come into play since then, which, you know, are not level,
level-playing field. But I think what we're seeing today, and we spoke about this today at the event, is ETFs and SAF mandates that are
disproportionately, you know, harmful and impact European carriers. It's just making this even more difficult.
QUEST: Up the road.
SMITH: Yes.
QUEST: They know this. They know this at the commission, at Berlaymont building. They've known this for years. You've been banging -- not you
personally but every, it's not getting through, Ben.
SMITH: Yes.
QUEST: It's not getting through. Why?
SMITH: Extremely frustrating. You know, it's a -- it's very slow here. It's not number one priority. It's not always well-understood. We're
hoping that what's going on today with the Gulf situation is a bit of a jolt to say, you know, we've got to, you know, consumers that are here,
Europeans are too dependent on others. So, you know, even though this is a terrible event that's going on and, you know, we have our own staff
and our own customers, we had to get out of there and all of those people that are based in the Middle East, I mean, you put that aside, we
have a real issue.
(END VIDEOTAPE)
QUEST: Ben Smith of Air France-KLM.
The largest airline group in Europe is, of course Lufthansa Group. Chief executive of Lufthansa says the war is a wake-up call for European
carriers. Carsten Spohr, basically the E.U. trying to sort things out.
(COMMERCIAL BREAK)
[16:52:45]
QUEST: Take a look at these remarkable images going viral on social media. It's the Thai king and his queen piloting their own plane on a
state visit to Laos. Now both of them are qualified pilots, and the royal couple successfully navigated the cockpit controls as they landed
the Royal 737. It's a Boeing.
The Thai king is the first royal leader to visit Laos in 32 years. I'm guessing he's the first one to have arrived on his own plane piloting it
with his wife as the co-pilot, as a king and a queen. What a fascinating story. There you go.
The chief executive of Lufthansa says the Iran crisis is the wake-up call needed for European carriers and a chance to get roots back from
their Gulf competitors. Carsten Spohr says it shows European airlines need to recapture market share in the Middle East and beyond and the
attitude in Brussels and perhaps this is the important point, (INAUDIBLE) in Brussels has already shifted.
(BEGIN VIDEOTAPE)
CARSTEN SPOHR, CEO, LUFTHANSA GROUP: I think when we talked about competitiveness people always thought about profits, about margins. But
we didn't talk enough about that it also means not being connected anymore. And now Europe realizes that there's certain parts of the
world, especially Southeast Asia, we are just not connected by our own means anymore.
Lufthansa used to fly to more than a dozen destinations in Southeast Asia. We are now down to two, Bangkok and Singapore, actually we're
opening up Kuala Lumpur this year. Fine. From two to three. The rest, from my competitors, Europe depending on non-European airlines to get
there.
QUEST: Now to the argument that would say, well, yes, but the other airlines that were flying them were able to fly them at a lower price or
a more competitive cost. You're just complaining because they were able to do it cheaper. What would you say on this level playing field idea?
SPOHR: Well, again, let's start with what we need to be sovereign. As we all know, Europe cannot defend itself. Europe cannot provide its own
energy, at least connect itself to its global markets should be in the hands of Europeans, European politicians, European companies, that we
have lost towards Southeast Asia.
[16:55:02]
And why? Because there was no level playing field. Cost burdens on European hubs, which are not occurring on non-European hubs.
Environmental cost, which only apply to European airlines, don't apply to our competitors outside of Europe. Add that all up we basically are
cut off.
QUEST: Do you see that there will be any change or worse scenario? Everybody says terrible, terrible, terrible, but nothing changes. This
crisis, you know, what's that famous phrase? Never waste a good crisis?
SPOHR: Well, let's first of all say none of us wanted this war. I mean, there's people dying over there. So I think we should never create this
positive attitude on a crisis of that magnitude. But do I believe this will serve as a wake-up call for old arguments we have been using for
many years? I think the attention level I see now in Brussels since a few days is completely different.
QUEST: Really?
SPOHR: It is.
QUEST: In what sense?
SPOHR: Well, people now understand it's not just a big company complaining about competitiveness to increase its margins or to increase
its profit, blah, blah, blah, or not even to add jobs, which is a good argument in itself. No, it really is about Europe and our sovereign
ability to connect.
QUEST: At the Lufthansa Group how are you naturally, turn to yourself, how are you managing what you're doing as a result? Obviously, fares
will have to reflect the fact that your jet fuel has gone -- has doubled.
SPOHR: Well, first of all, isolated on the crisis zone in Southeast Asia, we've added more than 50 flights over the last three weeks to
bring people home. Extra sections because of strong demand. So this is the operational way of managing it. But of course, even though we are
hedged to more than 80 percent, a fuel price increase of that magnitude will reflect itself in prices and fares. Absolutely.
QUEST: Do you sometimes just look at the things, whether it's the crisis in the war, the profitability, and margins. The tap for potential
purchase, the integration of it. It doesn't matter what the sheer amount of stuff that you're all dealing with. It's quite extraordinary.
SPOHR: Yes. But the company actually is celebrating its birth 100 years ago this year. And that, of course, forces you to look back and at the
same time, hopefully to look ahead. So is this a special company? We are based in Europe, which doesn't allow us to be as homogeneous as simple,
single brand, single company, single collective labor agreement as some of our competitors.
We have a more complex business model but it made us number one in Europe and number one in the world actually outside the U.S. So all
these efforts are well worth it. And in the end we do in Lufthansa what Europe needs to do. You need to Europeanize to be large enough to play a
global role. So what Brussels needs to do for the continent, we try to do for our company.
(END VIDEOTAPE)
QUEST: And tomorrow you'll hear the chief executive of EasyJet, Kenton Jarvis, who will explain why he's avoiding fuel surcharges and what his
legacy will be, or he hopes his legacy will be at EasyJet.
We will take a "Profitable Moment" after the break.
(COMMERCIAL BREAK)
QUEST: There was a definite different spirit at airlines for Europe. The airline CEOs believed that what they're seeing now is a moment in time.
Provided regulators and European politicians take the opportunity they believe that some of the wrongs that currently make the airline industry
and competitive could be right. We'll wait and see.
And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest in London. Whatever you're up to in the hours ahead, I do hope it's
profitable. Thank you for joining us tonight. I'll see you tomorrow from London.
END
