Profits at Ryanair descended in its third trading quarter amid falling fares and over-capacity in western Mediterranean markets, which holidaymakers have switched to after terrorist attacks in Turkey, Egypt and north Africa.
Michael O’Leary, chief executive of the budget airline, said the outlook for 2017 was “cautious” as he revealed profits fell 8 per cent to €95 million (£81m) in the three months to end-December.
Our fares this winter have fallen sharply as Ryanair continues to grow trafficMichael O’Leary
Ryanair said average fares in the period fell 17 per cent to some £33 and that prices were expected to fall further this year and into 2018.
“Our prices are falling faster than we initially planned, but this is good news for customers,” the airline said. O’Leary said the slump in the pound after the EU referendum last summer “exacerbated” the impact from falling fares.
He added: “As previously guided, our fares this winter have fallen sharply as Ryanair continues to grow traffic and load factors strongly in many European markets.”
In July, the carrier said the decision by the UK to quit the EU was a “surprise and disappointment”, and that the effect would be for Ryanair to skew future growth away from UK airports and towards mainland European hubs over the next two years.
The company repeated that stance yesterday, saying: “While it appears that we are heading for a ‘hard’ Brexit, there is still significant uncertainty in relation to what exactly this will entail. This uncertainty will continue to represent a challenge for our business for the remainder of 2017 and 2018.
“We expect sterling to remain volatile for some time and we may see a slowdown in economic growth in both the UK and Europe as we move closer to Brexit.
“While there may be opportunities to expand at certain UK airports, we expect to grow at a slower pace than previously planned in the UK.”
Ryanair said traffic rose 16 per cent to 29 million customers in the quarter, and it stuck to its full-year profit guidance of between €1.3 billion and €1.35bn, but dependent on the absence of any “unforeseen security events”.
Analysts are now forecasting other carriers could slash prices. Robin Byde, an analyst at Cantor Fitzgerald, said: “There is too much capacity in the European short haul market and both Ryanair and easyJet have ambitious growth plans.
“Both have signalled weaker yields, and are, in part, driving this discounting.”
Rival budget airline EasyJet, which last month warned of a £35m knock to its finances as it battles against the weak pound, said that its passenger numbers rose by 11 per cent to more than 4.7 million last month, while its load factor – which measures how full its planes were – increased by 1.2 percentage points to 86.2 per cent.
British airlines are waiting with bated breath to discover whether the UK will remain a member of the EU’s “Open Skies” aviation free market following Brexit.