Ryanair Posts Loss Amid Winter Competition

Monday 4 February 2019

Ryanair posted a net loss of €19.6m (£17.2m) for the last three months of the year as fierce competition forced it to cut fares.

The airline carried 32.7 million passengers compared with 30.4 million for the same period a year earlier as revenue rose 9% to €1.53bn.

But the airline said "excess winter capacity in Europe" cut its profit.

The company said chairman David Bonderman will leave in the summer of 2020.

In September, at the firm's annual meeting, almost 30% of shareholders voted against the re-election of Mr Bonderman as chairman after a summer of flight cancellations. He has spent 23 years in the job.

Chief Executive Michael O'Leary - who suggested last year that he could step down in the next five years - has agreed a new five-year contract, the firm said.

But his role will change slightly, in that Mr O'Leary will become group CEO and will manage chief executives for each airline brand: Ryanair, Laudamotion, Ryanair Sun and Ryanair UK.

Union distance

It is a similar structure to that of IAG, the company that owns British Airways.

Mr O'Leary will oversee costs, aircraft purchases and buying rival airlines. It could be good for industrial relations after a series of strikes over the summer, HSBC transport analyst Andrew Lobbenberg told the Today programme.

"It puts more distance between him and the unions," he said.

Mr O'Leary, who has been chief executive for 24 years, told September's annual meeting he had concerns about committing to a new five-year contract telling shareholders: "I'm not sure Mrs O'Leary would be happy."

He said the airline's loss was "disappointing", but "we take comfort that this was entirely due to weaker than expected air fares".

While higher oil prices and lower fares reduced the firm's profitability, they were creating even bigger problems for rivals, Ryanair pointed out.

Firms like Wow, Flybe and Germania are seeking buyers.

While the company blamed too many airlines chasing too few passengers, costs may be the real problem, said Mr Lobbenberg. The company's fuel costs leapt 32% and its staff costs rose 31%, the airline said. In total, Ryanair's operating costs rose 20% to €1.54bn.

"The heart of the big drop in their profitability is that their fuel costs are very high this year and their fuel hedging is not optimal," said Mr Lobbenberg, referring to the costs airlines agree in advance for aviation fuel.

"And then they've got a very large increase in their labour costs which is the annualisation of the large pay rises they put through last year to stabilise the industrial relations situation."

Source: BBC News

Date: 04/02/2019