Profits fall at low fares airline Ryanair
Europes largest low cost airline Ryanair has recorded profits down 27% for the third quarter to December, but plans to respond to economic uncertainty by slashing air fares.
Ryanairs performance gives a good indication of what is happening in the low fares airline sector in Europe. The number of people flying with Ryanair in the third quarter to December actually increased by 21%. But higher oil prices, the impact of the credit crunch, and higher charges at airports have led to Ryanairs lower profits.
Typically outspoken Ryanair ceo Michael OLeary says that unit costs excluding fuel hedges rose by 6% due to the unjustified doubling of airport charges at the Stansted airport monopoly, significantly higher charges at the even less competitive Dublin airport monopoly and 7% longer sectors.
Thankfully at most other airports, where competition exists, airport and handling costs are falling. This is as it should be in an era of ever declining air fares, adds OLeary.
Ryanairs new bases at Alicante airport and Valencia airport in Spain, and at Belfast City airport in Northern Ireland and Bristol airport in the UK, are reported to have performed well during their first winter. The low cost airline also plans to invest in new aircraft and new routes at its two new bases in the UK at Bournemouth airport and Birmingham airport.
But Ryanair is realistic about its prospects in the next financial year, warning that profits could fall by as much as 50%. The European airline sector is presently facing one of these cyclical downturns, with the possibility of a perfect storm of higher oil prices, poor consumer demand, weaker Sterling and higher costs at unchecked monopoly airports such as Dublin and Stansted, says OLeary.
There can be only one competitive response to any consumer uncertainty, and that is for Ryanair to slash fares and yields, stimulate traffic, encourage price sensitive consumers, and promote new routes/base developments, OLeary concludes.
Written by: Nick Purdom
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