Budget carrier blames weaker fares for third quarter loss

Budget airline Ryanair slid into a third quarter loss, blaming “weaker than expected fares”.

The carrier, which operates 67 routes from Manchester Airport and 34 from Liverpool John Lennon Airport, reported a £73.19m pre-tax loss for the three months to December 31.

This included a £53.84m exceptional loss related to Laudamotion, the Austrian airline it has acquired.

Discounting the Lauda costs, losses were £17.51m (20 million Euros).

Ryanair reported a £98.84m pre tax profit in the same period a year ago.

Revenues of £1.384bn compared with £1.229bn a year ago.

Passenger numbers rose by 8% to 32.7 million, while its load factor, or number of available seats sold, remained static at 96%.

However, it said its increased revenues were offset by a 6% decline in average fares, due to excess Winter capacity in Europe, while stronger ancillary revenue growth, from services such as on board catering, seat reservations and baggage charges, was offset by higher fuel, staff and compensation costs.

Chief executive Michael O’Leary said: “While a €20m loss in Q3 was disappointing, we take comfort that this was entirely due to weaker than expected air fares so our customers are enjoying record low prices, which is good for current and future traffic growth.

“While ancillary revenues performed strongly, up 26% in Q3, this was offset by higher fuel, staff and EU261 costs.”

The airline also admitted it was concerned about the impact Brexit could have on the industry.

It said today: “The risk of a ‘no deal’ Brexit remains worryingly high.

“While we hope that common sense will prevail, and lead to either a delay in Brexit, or agreement on the 21 month transition deal currently on the table, we have taken all necessary steps to protect Ryanair’s business in a no-deal environment.

“We have now obtained a UK AOC to protect our three domestic UK routes, and we will place restrictions on the voting rights and share sales of non-EU shareholders for a period of time (in the event of a hard Brexit) to ensure that Ryanair remains at all times an EU-owned and EU-controlled airline, even if the UK exits the EU without a deal.”

Mr O’Leary has also announced a new five-year contract as group chief executive, which secures his services for the group until at least July 2024.

“His agreement to commit for a five-year period is welcome, and will give certainty to our shareholders and allow him to guide the individual chief executive’s of Ryanair, Laudamotion and Ryanair Sun,” the carrier said.

Russ Mould, investment director at Manchester investment specialist AJ Bell, said: “Ryanair may have just posted a quarterly loss, but the man at the top is not going anywhere.

“Despite rumours to the contrary, partly fuelled by the man himself, the pugnacious Michael O’Leary is signing on for another five years as CEO.

“A pioneer in bringing the low-cost airline model first adopted in the US over to Europe, O’Leary has been in charge since 1994, making him one of the longest-serving chief executives around.

“For all the controversy and success, investors are entitled to at least question if O’Leary is the right man to take the company forward given the patchy recent track record and a stalling share price.

“The senior management team are not escaping completely unscathed from this disappointing recent period. Chairman David Bonderman has been around almost as long as O’Leary but will step down after a quarter of a century in 2020 after 30% of shareholders voted against his re-election last September.

“The company faces competitive pressures, which were the main contributor to a swing into the red in this latest quarter, but also the challenge of disputes with staff over pay and conditions.

“A new management structure, with O’Leary concentrating on managing costs, buying aircraft and M&A and leaving day-to-day running of the underlying airline franchises to others, will probably put some distance between him and the unions. That’s not a bad thing given he has a particularly fractious relationship with them.

“Tight management of costs, historically one of O’Leary’s and Ryanair’s strengths, will likely be fundamental to whether the next half decade proves a success, and this could require some finesse in industrial relations.”