Ryanair shares fall as rising costs see profits down 20%

Ryanair shares tumbled after profits plunged 20%, with the budget airline having been stung by lower fares, higher oil prices and pilot costs.
By The Newsroom
Published 23rd Jul 2018, 16:54 BST
Updated 23rd Jul 2018, 16:59 BST
The budget carrier has suffered from rapidly rising fuel costs as well as industrial action by pilotsThe budget carrier has suffered from rapidly rising fuel costs as well as industrial action by pilots
The budget carrier has suffered from rapidly rising fuel costs as well as industrial action by pilots

The company said pre-tax profits for the three months to June 30 slumped to g319 million (£285m) from g397m a year earlier (£354m).

It said full-year profit forecasts remain unchanged at between g1.25bn and g1.35bn euros (£1.12-1.21bn), but warned this was “heavily dependent” on fares in the current quarter and would require “no negative Brexit developments”.

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Average fares are expected to be lower over the summer due to the World Cup, the heatwave across northern Europe and uncertainly about pilot strikes, Ryanair said.

Like other airlines, Ryanair is being hit by air traffic control strikes in Europe, with carriers forced to pay some care costs to customers affected by the disruption.

Last year, it was also forced to cancel hundreds of flights due to what it said were problems with pilots’ rotas.

Unions claimed the real issue then was that disenchanted pilots were deserting the airline in droves, although Ryanair denied this, insisting the cancellations were the results of a “rostering failure”.

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That issue finally came to a head in December when chief executive Michael O’Leary recognised unions for the first time.

The airline has also been hit by pilot strikes in Ireland recently. Ryanair shares were down around 4.6% in morning trading.

Mr O’Leary said on Monday: “Traffic grew 7% to 37.6 million, despite over 2,500 flight cancellations caused by air traffic control staff shortages and strikes.”

The company said fuel prices have “risen substantially” from $50 (£38) per barrel at this time last year to almost $80 (£61) in the first quarter.

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Staff costs increased by 34% due to a 20% increase in pilot pay, 9% more flight hours and a 3% general pay increase for non-flight staff, Ryanair added.

The company said it was concerned about the danger of a hard Brexit - and the risk of one was being “under-estimated”.

The Irish carrier said: “While there is a view that a 21-month transition agreement from March 2019 to December 2020 will be implemented (and extended), recent events in the UK political sphere have added to this uncertainty, and we believe that the risk of a hard Brexit is being under-estimated.

“It is likely that in the event of a hard Brexit our UK shareholders will be treated as non-EU.

“We may be forced to restrict the voting rights of all non-EU shareholders in the event of a hard Brexit, to ensure that Ryanair remains majority-owned and controlled by EU shareholders.”

Related topics:RyanairTrafficUnionsBrexitEuropeIreland