Monday, 20 May 2019

Ryanair's profits down 29% but the boss says he'll win the fare war!

The European budget carrier Ryanair has released its full-year figures showing a profit of  €1.02 billion, down 29% that is despite seeing 7% growth in passengers to 139 million.

The low-fare-high-fee airline blames the fall in profits on the higher fuel costs that have had a massive impact on European airlines in recent times.  It also blamed its profits falling by a third on the low fares in the saturated marketplace - yet the main driving force behind the lowering of airfares in Europe is Ryanair!

Also having a negative impact on the airline's fiances was the grounding of the Boeing 737 Max aircraft following two fatal crashes. Ryanair delayed the delivery of its first 5  Boeing 737 Max aircraft to this coming winter and believes the type will be flying again in July for the USA and perhaps September or October for Europe and the rest of the world  - once aviation safety boards give the aircraft its new approval certificates. Ryanair believes these new arrivals will also drive better profit figures, as the firm proclaims they have 4% more seats and are 16% more fuel efficient. Ryanair's bullish boss Michael O'Leary says, has the utmost confidence in the Boeing 737 Max, which is just as well as the firm has 135 on order with options on 75 more!  Ryanair will also be talking to the US manufacturer about “modest compensation” it's Chief Financial Officer Neil Sorohan said. 

O'Leary said he fully expects the airline to reap the benefit from any looming price war in the industry, "artificially low prices" and "attritional fare wars" could dent profits for a year or two. "Frankly, if we are in a period where there's going to be attritional fare wars for a year or two that's good for Ryanair... as... we have the lowest cost base... profits will suffer for a year or two and I think that is what our shareholders should expect," O'Leary said. 

"However it is clear in my mind that within the next four to five years you are seeing the emergence of four or five large European airline groups," he warned. And, he's not wrong,  the European aviation industry has been through some turbulent times in recent months. The lower fares, market saturation, higher fuel costs has seen the likes of  Primera, Small Planet, Azur, Germania, Sky Works,  VLM (again!), Cobalt,  Cello, Flybmi and WOW air all flying their last flight. Flybe was only just saved by a last minute take over by a group that includes Virgin and Stobart, which - accord to some in Exeter isn't going accord to plan. It is not only likely but highly probable there will be more airlines going bankrupt or consolidating before the year is out. 

It was only last week that Ryanair's biggest budget rival EasyJet posted losses of £275 million in the six months to March 19, compared with a £68m loss for the same period last year. Alitalia is still up for sale and so are the airline businesses of Thomas Cook - which has been forced to reassure its customers today it is not going bust despite city analysts saying the shares are worthless. 

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