Ryanair’s wings clipped by cost of fuel and troubles in the eurozone

BUDGET airline Ryanair yesterday blamed a jump in fuel prices for a 29 per cent drop in first-quarter profits and warned that the ongoing eurozone crisis would continue to restrain fares growth.

BUDGET airline Ryanair yesterday blamed a jump in fuel prices for a 29 per cent drop in first-quarter profits and warned that the ongoing eurozone crisis would continue to restrain fares growth.

The carrier said a 4 per cent rise in average fares helped increase revenues to €1.3 billion (£1bn) for the three months to 30 June, an increase of 11 per cent on the same period last year.

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Chief executive Michael O’Leary said a 27 per cent surge in fuel costs was behind the slide in underlying pre-tax profits, which came in at €99m for the first quarter – down from the €139m it posted for the same

period last year and below analysts’ forecasts of €123m.

The news came as Air France-KLM said its operating losses more than halved to €66m during its second quarter, on revenues 4.5 per cent higher at €6.5bn.

Dublin-based Ryanair maintained its profit forecast of between €400m and €440m for the year to March, although it braced itself for a difficult winter as austerity measures and the eurozone crisis hit demand.

The airline, which operates more than 1,500 flights a day across 28 countries, expects traffic growth of 1 per cent between September and March, down from 7 per cent this summer following winter capacity cuts.

It reported a 15 per cent rise in ancillary sales – which includes baggage and administration fees, as well as in-flight food and drink – to €286m. Ancillary sales now account for 22 per cent of all revenues.

The carrier, which has a fleet of 294 planes, said growth in the first quarter was dampened by the EU-wide recession, austerity measures and also heavy discounting at new bases including Cyprus, Denmark and Hungary.

O’Leary hit out at the Spanish government for raising airport taxes at the start of July, saying the move has prompted airlines to cut winter capacity, which will have knock-on effects on the country’s tourism industry.

He added: “The Spanish government must reverse these unjustified increases if they wish to grow Spain’s tourism and generate new jobs.”

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Rival outfit easyJet recently announced plans to cut flights to and from Madrid by 20 per cent. It will no longer base crew and aircraft there from next winter after the location delivered the lowest returns of its bases.

EasyJet, which last week reported a 10.5 per cent rise in third-quarter revenues to £1bn, expects to deliver a pre-tax profit of up to £300m for the year to 30 September, ahead of last year’s figure of £248m.

Ryanair mounted a fresh bid to seize control of rival Aer Lingus last month by tabling an offer valuing the company at around €694m.

The airline, which already owns a 29.8 per cent stake in Aer Lingus, needs approval from European regulators for the deal to go ahead. A previous takeover attempt in 2006 was rejected, and the European Commission will decide by 29 August whether to clear the latest approach.

Ryanair yesterday said it would be “inappropriate” to comment while it was engaging with regulators. Aer Lingus, which has rejected the bid, reports its first-half results today.

Abu Dhabi-based Etihad Airways bought a 3 per cent stake in Aer Lingus in May and the two carriers, which yesterday announced a code-sharing agreement, are in talks about developing closer working ties, including joint procurement.

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