Ryanair has reported a 7% fall in its half-year profits to €1.20bn and warns it ‘cannot rule out further capacity cuts or base closures’ this winter if costs continue to rise.
The airline said average fares declined 3% due to excess capacity in Europe, an earlier Easter in the first quarter, repeated air traffic control strikes/staff shortages which caused a spike in cancellations of higher-fare, weekend flights.
That figure does not include costs associated with the purchase of a bigger share of Laudamotion, which are in the region of €4.5m. Ryanair extended its share of the airline to 75% in August.
Higher fuel, staff and EU261 costs have offset strong ancillary revenue growth, Ryanair added and lower fares, higher oil prices and passenger compensation costs under EU261 regulations leave Ryanair’s full-year guidance unchanged at €1.10bn-€1.20bn.
The airline carried 6% more passengers in the six months to September 30 2018, at 76.6 million. Revenue was up 8%, to €4.79bn, but net margins showed a drop of four percentage points, at 25% compared to 29% the previous year.
Chief executive Michael O’Leary said: "As recently guided, H1 average fares fell by 3%.
"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."
"We took delivery of 23 new B737s in H1 (bringing the fleet to 450) and launched over 100 new S.18 routes. We have trimmed winter capacity by 1% (including base closures in Eindhoven and Bremen) in response to weaker fares and higher oil prices.
"We expect FY19 traffic will grow to 141m (incl. 3m Laudamotion). As we look beyond this winter, we have announced new summer 19 bases in Bordeaux, Marseille, London Southend and increased capacity in Luton. We plan to operate over 100 new routes in summer 2019."
He added: "Airline margins are under pressure and it is inevitable that more of the weaker, unhedged, European airlines will fold this winter.
"In recent weeks Skyworks (Switz.), VLM (Bel.), Small Planet & Azur Air (Ger.), Cobalt (Cyprus) and Primera Air (Stansted & Scandinavia) collapsed.
"At the same time, many larger airlines are closing bases and cutting routes to minimise winter losses.
"We expect more failures this winter and we cannot rule out further capacity cuts or base closures in Ryanair if oil prices rise or air fares fall further. Over the medium term, this consolidation will create growth opportunities for Ryanair’s lowest fare/lowest cost model."
