Ryanair warns of Brexit threat to flights as profits soar

Ryanair is led by chief executive Michael O'Leary. Picture: Ian Georgeson
Ryanair is led by chief executive Michael O'Leary. Picture: Ian Georgeson
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Low-cost carrier Ryanair has posted a jump in first-quarter profits, but again warned that Brexit could cause it to ground flights and cancel holidays unless a deal with the European Union is struck.

The airline reported a 13 per cent rise in revenues to €1.9 billion (£1.7bn) for the three months to the end of June, while profits soared 55 per cent to €397 million.

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Ryanair was boosted by the timing of Easter, and saw a 12 per cent rise in customer numbers to 35 million.

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Average fares rose 1 per cent in the period, but it expects fares to fall by 5 per cent in the first six months of the year and by 8 per cent in the second amid tough competition in the sector and as Ryanair passes on lower fuel costs.

“We expect the pricing environment to remain very competitive,” Ryanair chief executive Michael O’Leary said.

But chief financial officer Neil Sorahan insisted the airline was “never that worried per se about fares”.

He said: “We’re what we call load active yield passive, which means we’ll always hit the passenger target and the market more or less dictates what they’re going to pay for those seats.”

By maximising passenger numbers the airline can achieve discounts in airport fees, spread its fixed costs among more customers and sell more ancillary products such as on-board drinks, car hire and accommodation, Sorahan said.

He added: “We will happily trade away fares to drive the other elements of the business and as you can see we’re growing quite profitably.”

The group again sounded the alarm bell on Britain’s divorce from the EU as Tory ministers scramble to strike an aviation deal with the EU before March 2019.

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Ryanair said: “While we continue to campaign for the UK to remain in the EU Open Skies agreement, we caution that, should the UK leave, there may not be sufficient time, or goodwill on both sides, to negotiate a timely replacement bilateral which could result in a disruption of flights between the UK and Europe for a period of time from April 2019 onwards.

“If we do not have certainty about the legal basis for the operation of flights between the UK and the EU by autumn 2018, we may be forced to cancel flights and move some, or all, of our UK-based aircraft to Continental Europe from April 2019 onwards.”

Rival budget carrier EasyJet recently applied for a new air operator’s certificate (AOC) in Austria to allow it to continue flying in the European Union after Brexit.

The airline, whose chief executive Carolyn McCall is leaving to take the top job at broadcaster ITV, said the accreditation process was “well advanced” and it hopes to receive the AOC “in the near future”. EasyJet Europe would be headquartered in Vienna.

Sorahan warned that the chances of the UK remaining in the EU Open Skies agreement – through which there are no commercial restrictions for airlines flying within the EU – appear “narrower by the day”.

He went on: “Ryanair will clearly work in the best interests of our shareholders and customers to ensure we capitalise on all opportunities that are in the market.

“We’re working hard with the various interest groups in Europe and in the UK to try and get people to start moving this along at a pace that makes sense because the clock is ticking down.”

Ryanair also announced that it has submitted a non-binding offer for struggling Italian flag-carrier Alitalia, which went into administration in May for the second time in a decade.

Neil Wilson, senior market analyst at ETX Capital, said: “A huge jump in quarterly profits for Ryanair was not enough to assuage investor fears that the company is at the mercy of the pricing pressures felt across the sector.

“The push for more bums on seats means fares are coming down.”

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