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Ryanair and Wizzair fined over cabin bags

People getting off a Ryanair aeroplane
Reuters

Ryanair and Wizzair have been fined €3m and €1m respectively by Italy's Competition Authority (ICA) over their cabin bag policies.

Both budget airlines have a policy whereby small cabin bags can only be placed in the cabin free of charge if they can be stowed under the seat in front of the passenger.

Any bigger bags weighing up to 10kg cost extra, for example upgrading one's plane ticket to a priority boarding pass.

The ICA said that requiring customers to pay between €5-25 extra in order to bring cabin bags aboard was misleading and a "non-transparent" way to raise ticket prices.

Ryanair has hit out against the decision, according to AFP, saying its policy was transparent and helped flight punctuality as it speeded up boarding.

Ryanair 'licking its wounds'

Shares in Ryanair have fallen nearly 4% after the airline reported a third quarter loss of €19.6m (£17.2m).

George Salmon, equity analyst at Hargreaves Lansdown, said: “Ryanair is licking its wounds after a difficult 2018 that saw extra competition drive down prices and higher staff and compensation costs push expenses up.

"Brexit uncertainty continues to weigh on the company, but the most interesting news in these numbers is the fact the group doesn’t share the more upbeat outlook of competitors. Ryanair has said pricing pressure will continue into summer 2019.

"Lower profitability has seen net debt tick up past €1bn, but the balance sheet remains strong – especially since Ryanair owns over half its planes outright.

"This sure footing and a dominant market share means Ryanair should come out of the current turbulence on top, but its weaker outlook on pricing suggests things could get worse before they get better.”

Ryanair management restructuring

Today Programme

BBC Radio 4

Ryanair plane
Reuters

The new deal signed by Michael O'Leary means he will be "Group CEO" for the next five years.

The addition of the word "group", reflects the fact the Ryanair has said that over the next 12 months it will "move to a group structure not dissimilar to that of [British Airways owner] IAG".

The airline said: "A small senior management team will oversee the development of 4 airline subsidiaries; Ryanair DAC, Laudamotion, Ryanair Sun and Ryanair UK, each with their own CEOs and management teams."

Andrew Lobbenberg from HSBC told the Today programme: "I think what they're trying to do is to put in place a management structure that keeps Michael O'Leary running the shop, and yet it puts more distance between him and the unions at the main Ryanair Ireland business where they're working through the process of unionisation.

"It's not a natural territory for him to do that so to put a bit more clear water between him and the union makes it easier for them to reach a settlement."

Ryanair's O'Leary agrees new 5-year deal

Michael O'Leary
EPA

Ryanair's Michael O'Leary has agreed a new 5-year contract as group chief executive, which means he will stay at the airline until at least July 2024.

Last year, Mr O'Leary had said that he was "not sure" if he wanted to sign another five-year deal with the airline, saying he was discussing a two or three-year deal followed by a rolling 12-month contract.

In another boardroom move at the airline, chairman David Bonderman has said he will not seek re-election to the position after summer 2020.

Some investors in the airline had been demanding change, and nearly 30% of shareholders voted against the re-election of Mr Bonderman at Ryanair's AGM in September last year.

Mr Bonderman's role will be taken up by Stan McCarthy, the former chief executive of Kerry Group.

Ryanair reports third-quarter loss

Ryanair plane
Reuters

No-frills airline Ryanair has reported a €20m loss for the third quarter due to weaker fares.

The airline had warned on profits just a couple of weeks ago, and the company reiterated in its latest results that it could not rule out a further downgrade.

"We do not share the recent optimistic outlook of some competitors that Summer 2019 airfares will rise," Ryanair said.

"In the absence of further EU airline failures, and because of the recent fall in oil prices (which allows loss-making unhedged competitors to survive longer), we expect excess short haul capacity to continue through 2019."

Ryanair buys Niki Lauda's airline

Niki Lauda
Reuters

Ryanair has announced that it has acquired low-cost Austrian carrier Laudamation, completing a takeover which began in March 2018.

It previously owned a 75% stake in Laudamotion.

Formula One racing champion Niki Lauda, who founded the airline and last year bought back and re-branded it, gave Ryanair the option to buy the whole carrier.

The airline plans to increase its fleet to 25 aircraft in summer 2019, from 19 planes last summer.

'A problematic warning'

Ryanair wing
Getty Images

Ryanair has "delivered a profits warning that has rattled investors across the airline sector just as uncertainty over the outlook for carriers is at a high", says markets.com analyst Neil Wilson.

"It has been a tough winter for the airline with fares considerably lower than previously expected. Winter fares skidded -7% against a previous forecast of -2%. The sector seems to be doing its best to compete away margins, as is its habit.

He notes that "there was a further sting in the tail as management warned it could not rule out further cuts to air fares or a reduction in guidance."

While Ryanair said that traffic had grown ahead of forecasts: "This is a problematic warning as it comes at a time of great uncertainty for the sector."

Turbulence for Ryanair shares

Mike van Dulken, head of research, at Ascendo Markets reminds us that it has been a bumpy few months for investors in Ryanair.

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