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Ryanair sees 7% profit fall, with further headwinds on the horizon

The low-cost aircraft carrier was hit by strikes and a hike in oil prices over the summer with potentially tough times ahead for the second half of the financial year.

Ryanair plane on runway
Source: Bloomberg

Ryanair reported a 7% fall in profits to €1.2 billion in its first half (H1) 2019 results, with average fares down 3% due to excess capacity in Europe.

The disappointing results were blamed on repeated airport traffic controller (ATC) strikes and staff shortages, which led to a surge in flight cancellations.

The company also faced higher fuel costs in H1 19, with the spot price for oil climbing as high as $85bbl during a period which saw interest rates rise, putting airline margins under significant pressure.

Ryanair contended in its report that ‘weaker, unhedged, European airlines will fold this winter’, because of the myriad of macroeconomic pressures facing the industry.

‘As recently guided, H1 average fares fell by 3%,’ CEO Michael O’Leary said. ‘While ancillary revenues performed strongly, up 27%, these were offset by higher fuel, staff and EU261 costs.’

‘Our traffic, which was repeatedly impacted by the worst summer of ATC disruptions on record, grew 6% at an unchanged 96% load factor,’ he added.

Ryanair headwinds

Looking ahead, the low-cost carrier warned that the airline pricing environment, capacity growth in Europe, increased fuel costs and greater competition from new and existing carriers could significantly impact its performance in the second half of the financial year.

Ryanair also said that uncertainties surrounding Brexit, currency movements and the wider economic environment in Ireland, the UK and Europe is a concern for the company.

Last year, the low-cost carrier was hit with the first ever pilots strike, which saw flight crews in Germany stage a four-hour walkout. In the wake of the strikes, Ryanair agreed to recognise unions and has since signed agreements with pilots and cabin crews in Ireland, Italy, the UK and Germany, with the carrier continuing to negotiate with workers in other European markets.

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