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Ryanair profits hit by pilot pay deal

Ryanair aircraft

Ryanair has reported a 20 per cent drop in Q1 profits, which it attributes to a number of factors including higher staff costs owing to a pay deal struck by pilots.

The airline agreed to recognise trade unions in December after facing threats of strikes over Christmas and struck a deal with the British Airline Pilots' Association in January. Part of the agreement included a 20 per cent pay rise.

This, combined with a 3 per cent general pay rise for non-flight crew and 9 per cent more flight hours, increased Ryanair’s staff costs by 34 per cent.

The carrier also claims a combination of traffic growth of 7 per cent, overcapacity in Europe cause by increased competition, an early Easter, the World Cup and the European heat wave led to a 4 per cent decrease in average fares.

Despite the fall in profits to €319 million, Ryanair has not adjusted its full-year outlook, remaining confident in its projected profits of €1.25 billion to €1.35 billion.

The carrier says it only expects a 1 per cent rise in average fares for Q2 compared to the projected 4 per cent due to the impact of strikes on forward pricing.

Ryanair is preparing for further pilot and cabin crew strikes this week.

Ryanair CEO Michael O’Leary said its profit guidance is “heavily dependent” on fares, crew strikes, air traffic control shortages and strikes, the absence of any unforeseen events and a lack of negative Brexit developments.

On the topic of the UK’s exit from the EU, O’Leary said he is still concerned about the impact of a “no-deal” Brexit and that “recent events in the UK political sphere have added to this uncertainty, and we believe that the risk of a hard Brexit is being underestimated.”

O’Leary commented that Ryanair believes its UK shareholders will be treated as “non-EU” in the case of a hard Brexit and that their voting rights may have to be restricted “to ensure that Ryanair remains majority owned and controlled by EU shareholders”.

The carrier has applied for a UK air operator certificate “to protect its UK flights” and expects to receive it by the end of 2018.

Turning his attention to Ryanair’s stake in new airline Laudamotion, O’Leary said the late release of the carrier’s summer 2018 fares and “considerable damage caused by Lufthansa” means it could lose €150 million in its first year.

O'Leary famously threatened to ground Ryanair flights following the UK's exit to make Brexit voters "rethink" their decision.

Ryanair and Lufthansa are locked in a battle of words after O’Leary claimed Lufthansa has refused to pay Laudamotion for flights it operated on the German group’s behalf and has only leased a portion of the aircraft it agreed to hand over in order to receive competition approval to buy out collapsed airline Air Berlin, and at “rates that are substantially above market rates”. O’Leary also claims Lufthansa is attempting to break its agreement with the EU by seeking to end its contract with Laudamotion and instead give the aircraft to its own low-cost subsidiary, Eurowings.

Lufthansa denies all of these allegations, claiming Laudomotion has failed to make lease payments on the aircraft and that it is exercising its contractual right to terminate the agreement and give the planes to Eurowings.

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