Ryanair shares slump as lower fares and higher costs…

Ryanair shares slump as lower fares and higher costs send profits down 20%

Ryanair shares tumbled after profits plunged 20%, with the budget airline having been stung by lower fares, higher oil prices and pilot costs.

The company said pre-tax profits for the three months to June 30 slumped to 319 million euro (£285 million) from 397 million euro a year earlier (£354 million).

It said full-year profit forecasts remain unchanged at between 1.25 billion and 1.35 billion euros (£1.12 billion-£1.21 billionn), but warned this was “heavily dependent” on fares in the current quarter and would require “no negative Brexit developments”.

Average fares are expected to be lower over the summer due to the World Cup, the heatwave across northern Europe and uncertainly about pilot strikes, Ryanair said.

Like other airlines, Ryanair is being hit by air traffic control strikes in Europe, with carriers forced to pay some care costs to customers affected by the disruption.

Last year, Ryanair was also forced to cancel hundreds of flights due to what it said were problems with pilots’ rotas.

Unions claimed the real issue then was that disenchanted pilots were deserting the airline in droves, although Ryanair denied this, insisting the cancellations were the results of a “rostering failure”.

That issue finally came to a head in December when chief executive Michael O’Leary recognised unions for the first time.

The airline has also been hit by pilot strikes in Ireland recently.

Ryanair shares were down around 4.6% in morning trading.

Ryanair pilots on a picket line

Mr O’Leary said on Monday: “Traffic grew 7% to 37.6 million, despite over 2,500 flight cancellations caused by air traffic control staff shortages and strikes.”

The company said fuel prices have “risen substantially” from 50 dollars (£38) per barrel at this time last year to almost 80 dollars (£61) in the first quarter.

Staff costs increased by 34% due to a 20% increase in pilot pay, 9% more flight hours and a 3% general pay increase for non-flight staff, Ryanair added.

The company said it was concerned about the danger of a hard Brexit – and the risk of one was being “under-estimated”.

The Irish carrier said: “While there is a view that a 21-month transition agreement from March 2019 to December 2020 will be implemented (and extended), recent events in the UK political sphere have added to this uncertainty, and we believe that the risk of a hard Brexit is being under-estimated.

“It is likely that in the event of a hard Brexit our UK shareholders will 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.”

Commenting on Ryanair’s results, Russ Mould, investment director at AJ Bell, said Mr O’Leary may have to “dust off some of his wacky cost-saving ideas” if he hopes to deal with the latest raft of financial pressures.

“In the past the airline has suggested having passengers load their own luggage and that some planes should remove one of the toilets to accommodate extra seats, among many other ideas to boost revenue and profit.

“Ryanair has also previously talked about potentially offering event tickets, restaurant bookings and other travel-related services.”

Mr Mould said the airline had so far succeeded at “sweating its assets” and “making money from passengers beyond the price of an airline ticket”.

“Yet first-quarter results would suggest it needs to do more to cope with higher oil prices, higher pilot costs and yet another bout of strikes,” he added.


Sorry we are not currently accepting comments on this article.

Read more at DailyMail.co.uk