Ryanair may ‘slash fares in price war’
O’Leary lowers airline profit forecast to €1.1billion
RYANAIR could be forced to slash fares again as it fights a vicious price war that is expected to cost the airline up to €200million.
Michael O’Leary, the airline’s boss, said passengers are getting record bargains, but this is hitting his firm in the pocket.
Return trips from Dublin to the UK and some continental cities were yesterday being sold for as little as €30 by Ryanair before extras, with comparison website Skyscanner saying average prices for some destinations have fallen by as much as 26% in a year.
That has eaten into the airline’s takings. Ryanair cut its profit forecast for the second time in four months yesterday, blaming lowerthan-expected winter fares. It had initially hoped to make a profit of €1.25billion to €1.35billion, before paring this back in October to €1.2billion and cutting it further yesterday. It now expects to make a profit of between €1billion and €1.1billion.
The news saw its shares fall 27 cents, or 3%, at one point to €9.75. They later recovered to end the day at €10.10 a share.
Fares are expected to be down by 7% this winter. The current low fares across Europe have seen at least three airlines either being gobbled up by larger rivals or put up for sale.
Although Mr O’Leary said he was ‘disappointed’ at the lower expected profits, he pointed out costs and sales were ‘positive for the medium term’.
Travel industry expert Eoghan Corry, of travelextra.ie, said the profit warning was just a minor blip in what was still a very positive story. He said: ‘They will turn it round. They’ve pots of money.
‘The airlines are losing money hand over fist at the moment, the smaller ones, but Ryanair is reducing their profit guidance from €1.2billion to €1.1billion.
‘While that looks like bad news, it isn’t. Their profit is still going to be over €1billion in this day and age.’
Mr Corry said the bigger airlines are making more money than they ever have in their history – and that Ryanair ‘is riding that wave’.
‘But the smaller airlines are losing money, which you can see from the casualties,’ he added.
‘Every September two three airlines close down. It’s a favourable wind for big airlines; it’s not for smaller airlines.’
In the past 12 months, Ryanair’s share price has almost halved after a series of problems including pilot strikes at the airline. A year ago shares were trading at almost €17.
A flight between Dublin and Vienna, leaving February 5 and returning February 7, costs €14.98 each way via Ryanair’s subsidiary Laudamotion. A flight to Manchester, leaving Dublin on January 24, costs €14.98, with the return flight on January 28 costing €16.78.
‘They have got pots of money’