Ryanair to cut fares as fuel costs fall and profits rise

RYANAIR has pledged to cut fares further after it locked in lower prices for its fuel needs for the next two years.

The low-cost carrier said its fuel bill dropped in the past three months even though passenger numbers rose 12pc to 35m.

Chief executive Michael O’leary said 90pc of its fuel requirements were hedged next year at $49 per barrel and that it had taken advantage of recent price dips to increase its hedging level in the first half of 2019 to 45pc at $48 per barrel, giving it firepower to charge less for its flights. Brent crude, the European benchmark, is currently trading around $48.18 a barrel.

The comments came as the airline showed a 55pc rise in pre-tax profits to €443.7m (£396m) in the three months to June 30.

The steep growth was helped by Easter being absent from the comparable period but being included this year. Mr O’leary said average fares had fallen by 1pc to €40 partly due to a drop in bag revenue, as passengers opt to carry on two bags for free, and price cuts to encourage travellers to fly after the terror attacks in Manchester and London.

Mr O’leary said he expected Ryanair’s average fares to be down roughly 5pc at the end of its first half in September. The carrier held its guidance for the full year, disappointing analysts who had hoped Ryanair might upgrade its forecasts for sales and profits. The shares closed down 1.4pc at €17.85.

The airline has continued to develop other revenue streams, adding a fifth hotel partner to its Ryanair Rooms business and launching Ryanair Holidays in Italy and Spain in recent months.

It has also opened its third Travel Lab in Madrid, where it plans to hire 250 staff in the next two years to work on its online presence. Mr O’leary also repeated his threat that he would cancel flights as early as autumn 2018 if Brexit negotiators fail to provide airlines with certainty about an aviation agreement. The move would be a bold one given more than 40m out of its 131m customers will fly to or from the UK this year.

In its most recent financial year, roughly 25pc of its revenues were in sterling. The airline industry releases its schedules around 300 days in advance, meaning flights in April 2019 will be announced around June next year.

Ryanair has also made a nonbinding offer for Italian flag carrier Alitalia, which entered administration in May. This is understood to be one of around 10 such offers.