Ryanair has reported its lowest annual profit for four years, warning that earnings could fall further during what CEO Michael O’Leary describes as “attritional fare wars”. Shares closed at €10.30, a drop of 4.6%, having rallied slightly from a 6% drop after reassurance from O’Leary that a couple of years of lower fares and profitability was a reasonable price to pay for consolidation and an increased market share. This is still 40% below its August 2017 high of €19.39 prior to disruptive industrial unrest and fare weakness.
“Our strategy would be to keep adding capacity as quickly as we can in all the markets where we can,” O’Leary commented, adding: “Will it be painful for a year or two, yes it will. But will it shake out more of the competition, yes it will.”
The €1.02 billion after-tax profit annual profit to March 31, a drop of 29% year on year, was in line with investor forecasts, while revenues increased 6% to €7.56 billion, traffic grew 7% and fares declined 6% for the year. However, the low-cost carrier’s forecast for the current financial year, ending March 31, 2020, at between €750m and €950m was much worse than anticipated. However, this figure includes the acquisition of loss-making Laudamotion for the first time.
Ryanair has also been hit by the worldwide grounding of the Boeing 737 MAX jet in March. While the carrier currently has none of the aircraft, it had anticipated, starting early this year, to take delivery of the first of the 135 737 MAX 200s it has on order with an option for a further 75. This delay has forced the carrier to cut around 1 million seats for the period to end March 2020. However, despite the delays in delivery of the MAX200s, which is suspended until the FAA grants Boeing approval for upgrades which are believed to reduce the likelihood of any similar crash to the two recent ones, Ryanair anticipates operating up to 50 of the MAX 200 aircraft by next summer.
Several Ryanair rival airlines have warned of an even tougher trading environment ahead owing partly to overcapacity together with uncertainty over Brexit which has resulted in many European passengers holding off booking their summer holidays.
