O'Leary predicts Ryanair fares to fall by 5%

Ryanair chief executive Mr Michael O'Leary yesterday forecast that average fares would fall by about 5 per cent in its next financial year, starting in April.

The further drop in yields will put increasing pressure on rival European carriers, as Ryanair pushes ahead with its rapid expansion plans in continental Europe. The airline is adding seven new routes from London's Stansted airport - to Ostend in Belgium, Groningen in the Netherlands, Leipzig in Germany, Palermo in Italy, Bergerac and Rodez in France, and Blackpool in Britain - and could be flying into eastern Europe next year if airport authorities there offer a good deal on landing facilities.

The company has also extended the deadline for staff at its newly acquired Buzz airline to accept a rescue plan that would involve the loss of about 400 jobs.

Speaking in London yesterday, Mr O'Leary said the airline had been in discussion with several airports in eastern Europe with a view to expanding its network there.

"We've talked to airports in just about every former Soviet bloc country," he said. "If one of these eastern European airports comes up with an exceptional offer in terms of facilities and costs next summer, we may stick something there."

Mr O'Leary also said that letters were being sent to the 600 staff at Buzz to inform them who would be staying on under the new deal. Last week, Ryanair said it would ground the Dutch airline, which it acquired from KLM, in a bid to stem losses estimated at €1 million per week.

The proposed rescue plan would see the workforce cut by two-thirds to 200. All planes and airport facilities will be rebranded under the Ryanair name and booking will be centralised to the Ryanair website.

A quarter of Buzz pilots and up to 80 per cent of the cabin crew are expected to be made redundant. Ryanair also plans to cut fares by half to increase passenger numbers.

Staff and unions will now be given until March 14th - an extension of two days - to decide if they will accept the offer. Otherwise the company could face closure.

"The decision on closing down Buzz will not be within our control; it will be entirely within the control of the 200 or so people who are offered jobs," said Mr O'Leary. "All they have to do is call our bluff, sign the contract and take more money."

Fares on the seven new routes, which will operate from May 1st, will start at £29.99 sterling (€44). The new services will add 105 flights per week to the company's network and will extend it to 115 routes across 16 countries.