Ryanair prof­its hit by strikes and higher fuel costs

The Malta Business Weekly - - INTERNATIONAL -

Strikes by air traf­fic con­trollers and Ryanair pi­lots and cabin crew have con­trib­uted to a slide in half-year prof­its over the sum­mer.

The air­line re­ported a 7% fall in prof­its to €1.2bn for the six months to 30 Septem­ber.

Prof­its were also hit by higher fuel costs and what Michael O'Leary called "the worst sum­mer of ATC [air traf­fic con­trol] dis­rup­tions on record".

How­ever, traf­fic rose 6% and its planes were 96% full.

Av­er­age fares slipped 3% to €46, but an­cil­lary rev­enues - such as luggage and seat reser­va­tion fees - jumped 27% to €1.3bn.

Af­ter many years of ig­nor­ing work­ers' at­tempts to get it to recog­nise unions, Ryanair fi­nally agreed to do so at the end of 2017.

How­ever, con­tin­u­ing rows over work­ing con­di­tions led to the air­line be­ing hit by a wave of in­dus­trial ac­tion over the sum­mer by staff in sev­eral Euro­pean coun­tries.

Mr O'Leary said the strikes had had lit­tle im­pact on its sched­ules and that ri­vals such as Air France and Lufthansa had been hit harder by in­dus­trial ac­tion this sum­mer.

How­ever, Neil Wil­son at Mar­kets.com said strikes were hav­ing a "wor­ry­ing ef­fect on customer con­fi­dence ... in Ryanair, as ev­i­denced by the weak for­ward book­ings. Progress has been made on se­cur­ing deals with unions but there is a lot of work to do still."

Ris­ing oil prices have also bumped up Ryanair's fuel bill, eat­ing into prof­its. The car­rier spent €1.3bn on fuel in the first half of the year, up 22% from a year ear­lier.

Ear­lier this month, Ryanair warned that prof­its for the full year would be 12% lower than pre­vi­ously fore­cast at be­tween €1.1bn and €1.2bn. It re­ported a record €1.45bn profit af­ter tax for the year to 31 March.

"This full-year guid­ance re­mains heav­ily de­pen­dent on air fares not de­clin­ing fur­ther - they re­main soft this win­ter due to ex­cess ca­pac­ity in Europe - [and] the im­pact of sig­nif­i­cantly higher oil prices," Mr O'Leary added.

Ger­ald Khoo, an an­a­lyst at Liberum, said Ryanair's mar­gins were be­ing squeezed by lower av­er­age fares and higher fuel and staff costs, but re­mained at in­dus­try-lead­ing lev­els. "We do not see these be­ing fun­da­men­tally un­der­mined by the move to recog­nise unions," he added.

A num­ber of air­lines have col­lapsed in re­cent weeks, in­clud­ing Primera Air and Cobalt, and Mr Wil­son said Ryanair re­mained "very well placed to cap­i­talise on the in­evitable and long over­due con­sol­i­da­tion in the sec­tor".

He added: "Con­sol­i­da­tion should ul­ti­mately be good for Ryanair, but it's a tur­bu­lent ride at the mo­ment."

Mr O'Leary told Bloomberg that he hoped that more smaller air­lines failed "be­cause they de­serve to dis­ap­pear".

He pre­dicted a "very, very dif­fi­cult win­ter" for some air­lines and also ques­tioned the vi­a­bil­ity of ri­vals such as Norwegian, which was pay­ing $85 a bar­rel for fuel com­pared with Ryanair's $68.

The con­tro­ver­sial boss also dis­missed the prospect of a no-deal Brexit be­cause it would mean flights be­ing grounded on 1 April - the day af­ter the UK is due to leave the Euro­pean Union. Such a prospect would cause the gov­ern­ment to fall, Mr O'Leary said.

Shares in Ryanair have fallen by 40% since their peak of al­most €20 last Au­gust be­fore the strike ac­tion be­gan. Its shares rose 3.6% to €11.86 in early trad­ing in Lon­don on Mon­day.

The air­line came un­der fire over the week­end for apparently fail­ing to re­move a pas­sen­ger from a flight af­ter he racially abused a woman in her 70s.

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