Business

Ryanair a 'victim of its own niceness'

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Media captionRyanair reviewed its second carry-on bag allowance after "abuse" contributed to delays

Ryanair is reviewing its free second carry-on bag allowance because "abuse" is contributing to flight delays.

Director Neil Sorahan said the airline was a "victim" of its own "niceness", with people taking on board bags up to three times the permissible size.

The finance chief's comments came as Ryanair said average fares fell faster than "planned" in the third quarter.

Average fares dropped 17%, and profits slid 8% to 95m euros (£82m) as the fall in the pound also hit its results.

However, passenger numbers in the quarter rose 16% to 29 million, and its aircraft flew at 95% capacity.

Ryanair said it was "cautious" about the rest of the financial year, but profits would still meet expectations.

In its results statement the airline said that while its punctuality remained "industry leading" it had struggled this winter due to bad weather and air traffic control strikes.

"We are looking at new initiatives to address this problem, including a review of our service policies such as the two free carry-on bags which are the cause of increasing boarding gate delays," it added.

Speaking on BBC Radio 5 Live Mr Sorahan said some people "abuse" the baggage policies and "we want to make sure that people comply with the sizes that we have.

"I've seen bags twice three times the size of what a bag should be going on board and we've just been too nice in relation to that," he said.

However, he said getting rid of the second free carry-on bag, which was introduced in 2015, was just one a number of different initiatives the airline was looking at to tackle delays and no decision had been made.

'Weak price environment'

Ryanair's average fares were 33 euros (£28) per passenger in the October-to-December period, the third quarter of its financial year. "Our prices are falling faster than we initially planned," the airline said.

It said it was increasing capacity and adding new routes and bases at a time when other airlines were also adding capacity, and "accordingly the price environment remains weak".

Ryanair added that uncertainty following the Brexit vote, weaker sterling and the switch of charter capacity from Turkey, Egypt and North Africa into Spain and Portugal, would "continue to put downward pressure on pricing for the remainder of this year" and next.

It expects yields, or average fare per passenger per mile, in the fourth quarter to be down by 15%.

However, it said it was "maintaining its full-year profit guidance in the range of 1.30bn to 1.35bn euros".

In the next financial year it said it seemed clear that "pricing will continue to be challenging and we will respond to these adverse market conditions with strong traffic growth and lower unit costs".

"There's a huge amount of capacity which has migrated out of North Africa into the likes of Portugal and Spain," Mr Sorahan said.

"That said, Ryanair is very focused on our costs and you would have seen in the quarter our unit costs, excluding fuel, were down 6% at a time when our competitors are actually seeing their costs rise.

"It's the reason we're making the kind of profits that we made... and why we're retaining our [profit] guidance."

'Great opportunities'

Asked about the carrier's plans post-Brexit, Mr Sorahan said that while the airline expected to expand in the UK, "we have been quite clear that as we move closer to Brexit... that we won't grow as quickly in the UK as we might otherwise have done".

"We have 15% market share now all across Europe so there's an awful lot more to play for and we're seeing a lot of great opportunities outside of the UK," he added.

Neil Wilson, senior market analyst at ETX Capital, said: "Ryanair's trouble is that it has huge exposure to the UK market and sterling, but earnings are booked in euros.

"The airline derives about a quarter of its earnings in pounds so the collapse in sterling explains a good deal of the fall in profits," he added.

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