Price war hurts, but 175 new jets are on the way

RYANAIR will report its first fall in profits in five years tomorrow, but it could also announce a €1billion (£830million) bond issue to pay for new planes, a sign of confidence in its future.

Over the past year, consumers have benefited from a price war instigated by Ryanair after easy Jet’s greater emphasis on service opened up a clear difference between the two. It is that price war that is affecting Ryanair’s profits. But it is slashing prices in a bid to increase the number of passengers per plane, which would reduce its costs.

In September it will take delivery of the first of 175 new aircraft from Boeing and when it unveils its annual results for the year to March, the City expects it to announce the issue of €1billion to finance the 737-800s, reckons broker Cantor.

Both Ryanair and its main rival easy Jet have come under pressure from new low-cost entrants such as Norwegian Air Shuttle, the Hungarian airline Wizz Air and

Vueling, which is owned by British Airways-owner International Airlines Group.

From a small, familyowned airline flying from Waterford to London, O’Leary has transformed the business into Europe’s biggest airline, carrying 82million passengers annually, and it is aiming for 110million by 2018-19.

Meanwhile, easy Jet, under former Guardian newspaper boss Carolyn McCall has grown so substantially that last year it entered the FTSE 100 index of leading companies for the first time.

It reported that revenues were up 6.3 per cent in the six months to March and, for the first time, the airline transported 12million business passengers in the year to March.