Lower air fares and higher costs see Ryanair profits fall 20%

Airline’s share price tumbles 6.7% in Dublin following release of its first-quarter results

Michael O’Leary  said Ryanair had sold 96%  of the seats on its aircraft, which was an industry-leading load factor

Michael O’Leary said Ryanair had sold 96% of the seats on its aircraft, which was an industry-leading load factor

 

Ryanair shares tumbled on Monday after the airline reported that lower air fares and higher costs left profits trailing by 20 per cent at €319 million in the three months ended June 30th.

The Irish carrier’s revenue rose 9 per cent to €2.08 billion over the quarter from €1.9 billion during the same period last year.

Profit after tax fell to €319 million in the period – the first quarter of its financial year – from €397 million in the corresponding three months last year.

Its stock closed down 6.69 per cent at €14.51 in Dublin on Monday following the news. More than 6.34 million of its shares changed hands on the Irish market.

Chief executive Michael O’Leary noted that the airline had previously indicated that it expected profits to fall. He attributed the drop to lower air fares, higher oil prices and pilot costs, and the fact that half the Easter weekend fell outside the quarter this year.

“Traffic grew 7 per cent to 37.6 million despite over 2,500 flight cancellations caused by air traffic control staff shortages and air traffic control strikes,” Mr O’Leary added.

He said Ryanair had sold 96 per cent of the seats on its aircraft, which was an industry-leading load factor.

Winter schedule

Mr O’Leary warned that if strikes continued to damage customer confidence and forward prices in certain markets, Ryanair would review its winter schedule. This may “lead to fleet reductions at disrupted bases and job losses in markets where competitor employees are interfering in our negotiations with our people and their unions”.

Ryanair on Tuesday faces its third one-day strike by members of the Irish Airline Pilots’ Association (Ialpa), part of trade union Fórsa. Cabin crew in Belgium, Spain and Portugal plan stoppages on Wednesday and on Thursday.

The union said Mr O’Leary’s warning of job losses was not conducive to building trust and resolving the dispute. “Fórsa doesn’t accept that jobs or expansion in the airline need to be put at risk by company management.”

Directly-employed members of Ialpa have staged two one-day strikes at Ryanair in recent weeks in a dispute over base transfers, promotions, leave and other issues tied to seniority. A key union committee will meet on Wednesday to consider further industrial action.

Laudamotion

Ryanair expects that Laudamotion, in which it is investing €100 million for a 75 per cent stake, to lose €150 million in its first year. The Austrian airline, founded by former Formula One champion Niki Lauda, is charging lower than expected summer fares and is exposed to higher oil prices of $80 a barrel.

Mr O’Leary said Ryanair expected Laudamotion to break even by the third year of operations.

EU competition regulators only recently approved the deal, agreed in February, and Ryanair’s guidance does not include Laudamotion.

Mr O’Leary said that if there was a “hard” Brexit then Ryanair’s UK shareholders could be treated as non-EU. “We may be forced to restrict the voting rights of all non-EU shareholders in the event of a hard Brexit to ensure that Ryanair remains majority owned and controlled by EU shareholders.”

Ryanair has applied for a UK air operators’ certificate – an airline licence – to protect British domestic routes.