Europe follows Gulf in airline price war

LONDON: A new airline price war is brewing in Europe, mirroring fare-slashing already underway among the big Gulf carriers.

Europe’s largest airline on Monday said it may cut its fares by as much as 9 percent this summer compared to last year.

That is good news for holidaymakers planning summer breaks, as rivals also come under pressure to reduce ticket prices amid a competitive global aviation market.

“Some of the fare cuts seen from the Gulf carriers have been driven by excess capacity,” said John Strickland, a London-based independent aviation consultant.

“Those by Ryanair, while reflecting some market challenges, also reflect their unique cost advantage and their ability to place pressure on their competitors.”

Gulf airlines including Emirates, Etihad Airways and Qatar Airways have been cutting fares while seeking to reduce costs as they struggle to fill a glut of planes.

Ryanair has helped drive down airline ticket prices in Europe as it boosted capacity by about a third, or 30 million seats, over the last two years.

“We continue to see significant growth opportunities for Ryanair across Europe as competitors close bases or move capacity and legacy airlines restructure,” said Ryanair Chief Executive Michael O’Leary.

Analysts said rival carriers in Europe, including easyJet, Alitalia, Air Berlin, Monarch and Norwegian Air Shuttle would also come under pressure to reduce their fares.

Ryanair beat analyst expectations, reporting a profit of €397 million ($462 million) for the three months to the end of June.

But warnings about pressure on fares this summer sent the stock tumbling in early trade, while the shares prices of other airlines also fell.

“It’s a competitive market out there. You’re looking at fares down anywhere between 7, 8, maybe as much as 9 percent” in the three months to Sept. 30, Chief Financial Officer Neil Sorahan told Reuters.

Annual falls are likely to average 8 percent in the six months to March 31, the end of Ryanair’s financial year, he said.

The timing of Easter helped lift Ryanair fares by 1 percent on an annual basis, the airline said.

Separately, Ryanair confirmed it had made a “non-binding offer” for its loss-making Italian rival Alitalia.

“As the largest airline in Italy, it’s important we are involved in the process,” Ryanair said in a statement after Italian media reported Friday that about 10 such bids had been made, including one from Abu Dhabi-based Etihad.

O’Leary later said Ryainair would only pursue it if Alitalia is restructured and Italian government influence is removed.

The government in May pledged to provide a bridging loan to keep Alitalia flying for around six months. Interested parties have until October to make binding offers. If no buyer comes forward, the airline risks being wound up with the loss of about 20,000 jobs.

Etihad revealed a €1.758 billion investment plan aimed at revitalizing Alitalia three years ago.