Ryanair has reported a 21 per cent drop in profits for the first quarter, blaming the decline on lower fares in the market, higher fuel and staff costs, and concerns surrounding Brexit.
According to group CEO Michael O’Leary, the one of the airline’s weakest markets was Germany, where he claimed Lufthansa, which purchased Air Berlin last year, is “selling this excess capacity at below cost prices”. He said Brexit concerns in the UK also “weigh negatively on consumer confidence and spending”.
The latest report follows a 29 per cent decline in profits for the year to 31 March – something the airline also blamed on lower fares and higher costs.
Despite the fall in profits, ancillary revenue grew 27 per cent in the quarter to €800 million, resulting in the carrier’s revenue per passenger remaining relatively flat at €55.
While Ryanair claims to have “the lowest unit costs of any EU airline”, its Q1 fuel bill shot up 24 per cent due to higher prices and volume growth.
Other costs grew 4 per cent due to the consolidation of Lauda and a 21 per cent increase in staff costs. The airline is facing strikes by pilots in the UK in an ongoing dispute over pay and conditions.
In addition, the carrier handed back “expensive leases” to Lufthansa and replaced them with 20 lower-cost Airbus A320 operating leases.
Ryanair recently said it would be forced to cut flights next summer and potentially close some of its bases because a delay in deliveries of the troubled Boeing 737 Max aircraft will hit its passenger numbers. The carrier was expecting 58 of the aircraft to be delivered in time for the summer 2020 season, but now predicts it will only receive 30.
The Irish carrier also recently acquired Malta Air and will use the company to switch its Maltese, French, Italian and German fleets to a Maltese Air Operator Certificate (Air operator's certificate is granted by a country's aviation authority permitting the airline to fly commercially), which will allow those crews to pay income taxes locally instead of in Ireland.
Since June, Ryanair has started publishing its monthly CO2 emissions, which it says have been cut by 20 per cent over the last decade. The airline plans to reduce this by a further 10 per cent to under 60 grams per passenger/km by 2030. It has also invested in carbon offset projects in Africa, Portugal and Ireland.
Looking ahead, the airline expects fares for the first half to be down 6 per cent due to competition from rivals, but says its H2 guidance is “heavily dependent” on “no negative Brexit developments”.