Ryanair says summer fares weaker than expected, warns of more strikes

  • Q1 Profit falls 20 pct y/y but ahead of consensus
  • Hot weather, strikes push down average fares
  • CEO warns pilots of job losses in some markets

Ryanair on Monday warned that average fares would be lower than expected during its key summer period due to high competition, unusually hot weather in Northern Europe and uncertainty caused by a series of strikes.

Weaker fares combined with higher staff and fuel costs caused profit to fall by 20 percent compared with last year in the three months to the end of June, the first quarter of its financial year, it said.

But the profit of 319 million euros ($374.4 million) for the quarter was in line with earlier guidance and slightly ahead of a forecast of 305 million euros, according to a company poll of analysts.

“While Q1 fares were marginally stronger than previously expected, the recent weaker fare environment and the expected impact of crew strikes on forward pricing mean that Q2 fares will only rise by approx. 1 percent,” Chief Executive Michael O’Leary said in a statement.

The weaker environment was “due to the World Cup, the Northern European heat wave and customer uncertainty about pilot strikes,” O’Leary said. Ryanair released the results ahead of its worst-ever week for strike action, with over 300 of its daily 2,400 flights cancelled on Thursday and Friday due to action by cabin crew in Spain, Portugal, Italy and Belgium.

Ryanair, which flies in 37 countries and carried 130 million passengers last year, averted widespread strikes before Christmas by deciding to recognize trade unions for the first time in its 32-year history. But it has since struggled to reach agreement on terms with several of them.

“While we continue to actively engage with pilot and cabin crew unions across Europe, we expect further strikes over the peak summer period,” O’Leary said.

O’Leary said the airline would consider moving planes from some markets, including Ireland, if disruptions continue and that this could lead to job losses. “We cannot allow our customers flights to be unnecessarily disrupted by a tiny minority of pilots,” he said.

Ryanair reaffirmed its forecast for profit for the year to be between 1.25 billion euros and 1.35 billion euros, down from a record 1.45 billion in the year to March 31.

In May the airline forecast a 5 percent decline in average fares in the first quarter and a rise of 4 percent in the second quarter. On Monday it said fares fell 4 percent in the first quarter but would rise by only 1 percent in the second.

The results come after EasyJet, Europe’s second-biggest low-cost airline, raised its profit guidance, forecasting earnings could soar by as much as 45 percent this year. Fast-growing budget airline Norwegian Air Shuttle earlier in July also beat expectations with a second-quarter net profit.

Ryanair’s shares closed on Friday at 15.55 euros, down almost 20 percent from an all-time high of 19.38 euros in August last year before a rostering problem forced it to cancel 20,000 flights. It is 6 percent above its 12-month low of 14.61 after it shocked investors by agreeing to recognize unions.

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