Industry & Business

Irish airline Ryanair reported on Monday that Q3 profits fell 8% to €95 million, as average fares fell by 17% to just €33 per passenger and traffic grew 16% to 29 million customers. Q3 unit costs were cut by 12%. Ryanair also reported that €311 million was returned to shareholders in Q3 under a €550 million share buyback.

“As previously guided, our fares this winter have fallen sharply as Ryanair continues to grow traffic and load factors strongly in many European markets,” Ryanair CEO Michael O’Leary said. “These falling yields were exacerbated by the sharp decline in Sterling following the Brexit vote. Ryanair responded to this weaker environment by continuing to improve our Always Getting Better customer experience, cutting costs, and stimulating demand through lower fares which has seen load factors jump to record levels.”

The company also reported that load factors rose 2% to 95%, which they described as a Q3 record. During the same period, 95 new routes and five new bases opened

Ryanair said that they continued to grow capacity, new routes and bases, at a time when other EU airlines are also adding capacity, and accordingly prices remained weak, though they expect that the uncertainty post Brexit, weaker Sterling and the switch of charter capacity from Turkey, Egypt and North Africa into Spain and Portugal, will continue to put downward pressure on pricing for the remainder of this year and FY18.

“As the airline offering the lowest fares in every market, our prices are falling faster than we initially planned but this is good news for customers, and our airport partners but bad news for competitors who cannot match our low prices,” O’Leary said.

“We are growing strongly in Germany at a time when Air Berlin are restructuring. However we call on the German Government to follow London’s lead and break up the Berlin Airport monopoly which plans to close Tegel Airport so it can restrict capacity and increase prices, while leaving the city of Berlin with less airport capacity than Dublin. Ryanair has also lodged a complaint with the German Cartel Office (the “Bundeskartellamt”) which demonstrates how the proposed Lufthansa/Air Berlin wet lease agreement is nothing more than an old fashioned attempt at duopoly to share the market, block competition, and increase air fares.”

O’Leary also said that he expects to announce some additional UK and EU growth deals in the coming months as airports compete for growth against the difficult backdrop of Brexit uncertainty and that Ryanair should continue to grow strongly in continental Europe in 2017 with more new bases and routes to be added.

Fuel costs fell by 20% per passenger in Q3. Non-fuel unit costs were down 6% as Ryanair took delivery of new B737-800s (hedged at a blended €/$ rate of $1.31), negotiated further airport growth incentives, grew load factors, and benefited from Sterling weakness on some parts of their cost base.

Ryanair reported that they have struggled this winter with particularly adverse weather, repeated ATC strikes, and ATC staffing related slot delays which saw punctuality fall from 90% last year to 88% in the first nine months of FY17. In response, Ryanair are looking at new initiatives to address this problem, including a review of service policies such as the 2 free carry-on bags which they say are the cause of increasing boarding gate delays.

O’Leary reported that Ryanair’s balance sheet remains strong. In Dec the company moved into a small net debt position of €576 million having spent almost €1 billionn on CAPEX, €800 million on share buybacks and €300 million on debt repayments in the current year.

Speaking on Brexit, O’Leary said that “uncertainty will continue to represent a challenge for our business for the remainder of FY17 and FY18. We expect Sterling to remain volatile for some time and we may see a slowdown in economic growth in both the UK and Europe as we move closer to Brexit. While there may be opportunities to expand at certain UK airports (such as the recent extension of our growth deal at Stansted), we expect to grow at a slower pace than previously planned in the UK and will continue to switch capacity into other key markets around Europe. As previously noted, we hope that the UK remains a member of Europe’s “open skies” system. Until the final outcome is known, however, we will continue to adapt to changing circumstances in the best interest of our customers, people and shareholders.”

O’Leary said that the outlook for the remainder of FY17 is cautious, expecting Q4 yields to decline by as much as 15%. Ryanair expect to carry over 119 million customers in FY17, and full year ex-fuel unit costs are expected to fall by approx. 4%. Based on this, Ryanair are maintaining theirr full year profit guidance in a range of €1.30 billion to €1.35 billion, but this guidance heavily depends on the absence of any unforeseen security events affecting close in bookings.

Looking out into FY18, Ryanair are still finalising their budget but expect that pricing will continue to be challenging and they will respond to adverse market conditions with strong traffic growth and lower unit costs.Ryanair also said they expect their load factor active/price passive strategy will win market share from all higher cost EU competitor airlines, while continuing to open new markets.

Ryanair’s statement can be read in full here.