Ryanair profits warning due to ‘lower than expected’ winter fares

‘We believe this lower fare environment will continue to shake out more loss making competitors,’ said the chief executive Michael O’Leary

Europe’s biggest budget airline has warned investors that its profits will be around €100m (£88m) lower than expected for the financial year that ends in March 2019.

The predicted range for profits after tax is now €1-€1.1bn, down 9 per cent from the anticipated level. But new figure still represents a profit per passenger of €7, which is way ahead of most of its rivals.

Winter fares were originally expected to fall by 2 per cent, but the airline says they are down 7 per cent.

Ryanair operates a “price passive/load factor active” strategy, which means it will cut fares to whatever level is necessary to fill its planes – currently at a load factor of around 95 per cent.

It has been selling seats from the UK for as little as £9.99, which means it takes an instant loss as it is required to pay £13 in air passenger duty.

But its earnings from ancillaries are increasing – partly because of a drastic reduction in the amount of free cabin baggage passengers may take.

Ryanair expects to fly 142 million people in the current financial year, one million more than previously predicted. The term includes the troubled summer of 2018, when a series of strikes by pilots and cabin crew grounded hundreds of flights.

The airline was also hit by air-traffic control strikes and staff shortages.

The figures exclude start-up losses from its investment in the Austrian airline, Laudamotion, expected to total €140m (£123m).

The airline’s chief executive, Michael O’Leary said: “There is short haul over capacity in Europe this winter.

“We believe this lower fare environment will continue to shake out more loss making competitors.”

Last week Flybe was sold for £2m to a consortium involving Virgin Atlantic and Stobart Air.

The low-cost airline Norwegian is closing some of its bases in Europe and North America in a bid to cut losses.

Mr O’Leary warned: “We cannot rule out further cuts to air fares and/or slightly lower full year guidance if there are unexpected Brexit or security developments which adversely impact yields between now and the end of March.”

The airline warns investors: “Ryanair is exposed to Brexit-related risks and uncertainties, as approximately 24 per cent of revenue in fiscal year 2018 came from operations in the UK.”