Profits fall at Ryanair as European fares tumble

Ryanair's Michael O'Leary

Continued Brexit uncertainty today prompted Ryanair to present a "cautious" outlook for the remainder of FY17, hot on the heels of low-priced rival EasyJet's January warning that its pre-tax profit for the year will take a heavy hit as a result of the weakness of the pound.

Ryanair's average fares dropped 17 per cent in the reporting period, offset by a 16-per cent rise in passenger traffic.

But it stood by its previous guidance that annual post-tax profit would be in a range from €1.3bn to €1.35bn, although it said that guidance depended heavily on the absence of "security events" affecting bookings in its final two months of the year.

The Dublin-based company said Monday that its net income fell to 94.7 million euros ($102 million) from 102.7 million euros a year earlier.

Looking out into fiscal year 2018, the company is still finalising budget but it seems clear that pricing will continue to be challenging and it will respond to these adverse market conditions with strong traffic growth and lower unit costs.

It expects yields, or average fare per passenger per mile, in the fourth quarter to be down by 15 per cent. Ryanair expects the United Kingdom pound to remain volatile for some time, and said there could be a slowdown in European and United Kingdom economic growth as Brexit moves closer, with uncertainty remaining a challenge.

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While the firm has recently extended its growth deal at Stansted and said there may be further opportunities to expand at United Kingdom airports, it expects growth in the United Kingdom to be "at a slower pace than previously planned".

Robin Byde, a transport 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".

But he points out that, while fares have fallen over the winter, the airline's load factor rose to 95% over the quarter.

During the third quarter, Ryanair opened five new bases in Bucharest, Romania; Hamburg and Nuremberg, Germany; Prague, Czech Republic; and Vilnius, Lithuania.

"Ryanair expects to announce some additional United Kingdom and European Union growth deals in the coming months, as airports compete for our growth against the hard backdrop of Brexit uncertainty", the airline added.

"We expect sterling to remain volatile for some time and we may see a slowdown in economic growth in both the United Kingdom and Europe as we move closer to Brexit", he said.