Ryanair profits tumble as fares plummet

Ryanair profits tumble as fares plummet

Ryanair saw profits tumbled by 8% to €95 million in the final quarter of 2016 as fares plummeted amid ongoing post-Brexit vote uncertainty.

Average fares fell by 17% year-on-year in the three months to December 31 – the airline’s third quarter – as passenger numbers grew by 16% to almost 29 million.

Europe’s largest low fares carrier warned that a switch in charter capacity from Turkey, Egypt and north Africa will continue to put “downward pressure” on prices throughout 2017, in addition to uncertainty following the Brexit vote and the weaker value of sterling.

Growth from the UK will be at a slower pace as a result.

Chief executive Michael O’Leary said: “We continue to grow capacity, new routes and bases, at a time when other EU airlines are also adding capacity, and accordingly the price environment remains weak.”

He added: “As the airline offering the lowest fares in every market, our prices are falling faster than we initially planned but this is good news for customers, and our airport partners but bad news for competitors who cannot match our low prices.”

The airline expects to some additional UK and European expansion following a deal with Stansted to add nine new routes.

This will come “as airports compete for our growth against the difficult backdrop of Brexit uncertainty,” O’Leary said.

“We expect to continue to grow strongly in continental Europe in 2017 with more new bases and routes still to be added.”

He added: “While it appears that we are heading for a ‘hard’ Brexit, there is still significant uncertainty in relation to what exactly this will entail.

“This uncertainty will continue to represent a challenge for our business for the remainder of full year 2017 and full year 2018.

“We expect sterling to remain volatile for some time and we may see a slowdown in economic growth in both the UK and Europe as we move closer to Brexit.

“While there may be opportunities to expand at certain UK airports – such as the recent extension of our growth deal at Stansted – we expect to grow at a slower pace than previously planned in the UK and will continue to switch capacity into other key markets around Europe.

“As previously noted, we hope that the UK remains a member of Europe’s ‘open skies’ system. Until the final outcome is known, however, we will continue to adapt to changing circumstances in the best interest of our customers, people and shareholders.

He described the outlook as “cautious” for the carrier’s next financial year starting in April after maintaining current annual profit guidance of €1.30 billion to €1.35 billion.

O’Leary said: “We are still finalising our budget but it seems 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.

“We expect our load factor active/price passive strategy will win market share from all higher cost EU competitor airlines, while we continue to open new markets.

“The good news is that our customers will continue to enjoy our unique combination of lower prices and our Always Getting Better  customer experience for the benefit of our people, our passengers and our shareholders.”

Ryanair Holidays, launched in December, will be expanded from Germany, the UK and Ireland to other countries later in 2017, according to O’Leary.

“Membership of MyRyanair’ became mandatory in Q3 and will see memberships surge to 20 million individual customers by year end,” he said.

“We believe that ‘MyRyanair’ will enable us to better design exclusive benefits for our customers, while helping to eliminate unlicenced, mis-selling OTA’s and screen scrapers.”

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