Business

Ryanair hit by air fare battle and Brexit uncertainty

Ryanair plane Image copyright Getty Images

Ryanair has reported a sharp fall in quarterly profits as it reduced fares to drive up passenger numbers.

Profits fell 21% to €243m (£219m) for the three months to the end of June, as the average ticket price fell 6%.

The airline was also hit by higher costs for fuel and staff.

Chief executive Michael O'Leary said the two weakest markets were Germany, where Ryanair faced fierce competition on price, and the UK, where there were Brexit uncertainties.

Mr O'Leary said that in Germany, "Lufthansa was allowed to buy Air Berlin and is selling this excess capacity at below cost prices".

Meanwhile in the UK, "Brexit concerns weigh negatively on consumer confidence and spending".

He added that "the current weak fare environment has continued into the second quarter and we expect [first half] fares to be down approximately 6%".

Ryanair said the drop in fares had been partially offset by 14% higher ancillary revenue, such as from baggage, food and other fees.

"The June quarter results were not quite as bad as feared," Liberum analyst Gerald Khoo said in a note, adding that ticket revenue was "slightly light" compared with forecasts but that revenue from optional extras was "better than anticipated".

Threat to UK routes

In a call with analysts, the airline boss also warned that Ryanair might cut routes from London to Glasgow, Edinburgh and Belfast in the event of a no-deal Brexit.

"An obvious one [to cut] if there is a hard Brexit at the end of October, we have three UK domestic routes... they would readily fall out straight away," he said.

"There is a longer-term question mark over those in a hard Brexit," Mr O'Leary said. "Frankly... we are not growing in Edinburgh, Glasgow or Belfast."

Earlier this month, the carrier said it was adjusting its schedules because of the grounding of the Boeing 737 Max family of jets. It cut the number of new Max jets it was expecting to operate next summer from 58 to 30.

However, Mr O'Leary said on Monday that he was "concerned that the Max return to service keeps slipping".

He said the estimate for how many 737 Max planes Ryanair operates next summer could drop to 20, "which would significantly truncate our growth rate".

But, he also said that the number could move to 10 or zero if the situation was not sorted out "pretty quickly with the regulator".

The forecast for profits after tax for the year remains unchanged at between €750m and €950m (£675m-£850m).

In recent weeks, the airline has been hit by the threat of strike action by pilots in the UK and Ireland and cabin crew in Portugal.

Chief financial officer Niall Sorohan has said the airline is open to talks with staff.

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