Ryanair profits slide due to lower fares and Brexit uncertainty

Ryanair has reported its lowest profit in four years and forecast another slide this year, as air fares fell on the back of Brexit uncertainty and fierce competition in Europe.

Michael O’Leary, the Ryanair chief executive, said fares would continue to fall in the UK and Germany, pointing to consumer nervousness about Brexit. “There is a later booking pattern and we’re having to stimulate bookings with lower air fares,” he said.

Following two profit warnings since October, Europe’s biggest budget carrier posted a profit after tax of €1.02bn (£892m) for the year to 31 March, down from €1.45bn the previous year.

The figures exclude a €139.5m loss related to Laudamotion, the Austrian budget airline Ryanair took full control of in January. Including the Austrian business, profits were down 30% at €948m.

Average air fares tumbled 6% to €37 per passenger, as the number of passengers rose by 7% to 139 million.

Profits were also dragged down by higher fuel costs and cabin crew strikes last summer. Ryanair’s staff bill rose by €200m, including a 20% pay increase for pilots, and it paid out €50m in compensation due to air traffic control strikes and staff shortages.

The airline forecast profits of €750m to €950m for the year to March 2020, including Laudamotion.

Ryanair has been affected by delays in the delivery of Boeing 737 Max after its worldwide grounding in March following a fatal Ethiopian Airlines crash that killed 157 people. This has forced Ryanair to cut capacity by 1 million passengers this year, when it expects to fly 153 million people. It was due to take delivery of five 737 Max aircraft between April and June and a further 42 before March 2020.

The airline said it would not be taking delivery of its first five 737 Max aircraft until winter, assuming the plane was approved by the European safety agency before then. But O’Leary said Ryanair had the “utmost confidence” in a plane that would bring significant savings over the next five years

As weaker airlines fail or get taken over, O’Leary said he expected a handful of big carriers to be left in Europe – Ryanair, Lufthansa, British Airways owner IAG, Air France-KLM and easyJet. At this point fares would start to rise again, he predicted, arguing that they were “artificially low”.

Iceland’s Wow Air recently stopped flying after failing to secure emergency funding. One UK regional airline, Flybmi, collapsed in February, while another, Flybe, was bought by a consortium led by Virgin Atlantic in a deal that valued Flybe at only £2.2m.

EasyJet too has felt the pinch, reporting a £275m loss last week for the first half of the year.

Laith Khalaf, a senior analyst at Hargreaves Lansdown, said: “Ryanair is putting more bums on seats, but it’s charging less money per bum, while each seat is costing the airline more.

“With both easyJet and Ryanair continuing to pump capacity into the market, that’s unlikely to change any time soon.”