Ryanair has warned of further base closures and capacity cuts in the coming months if oil prices continue to rise and air fares continue to fall.
The airline yesterday followed up its full-year profit warning from earlier this month by reporting a 7% year-on-year fall in first-half, post-tax profit to €1.2bn for the six months to the end of September.
Revenues rose 8% on the same period last year to €4.79bn. These were heavily driven by ancillary revenues which were up by 27% at €1.3bn. However, revenue growth was eaten into by higher fuel, staff and passenger costs.
As expected Ryanair’s average air fares fell by 3% in the first half, to under €46, and a near 2% fall is expected in the second half.
The airline said that fares remain “soft” this winter, due to excess capacity in Europe.
Despite the figures, Ryanair’s share rose over 4% yesterday aided by the company reiterating confidence in reaching agreements with worker unions by Christmas and nearing a potential end to a long-running series of labour disputes which have caused flight disruptions and investor unease, which has led to a near 30% drop in its share value in the past year.
“We cannot rule out further base closures or capacity cuts this winter if oil prices rise or air fares fall further,” said Ryanair.
It recently closed its bases in Eindhoven and Bremen. It also said that winter trading could be positively impacted by the rate and timing of other airline failures.
Ryanair’s passenger numbers rose, in the first half, to 76.6 million passengers, but chief executive Michael O’Leary said traffic was repeatedly impacted by “the worst summer” of air traffic control disruptions “on record”.
Ryanair said it has made good progress in pilot and cabin crew union negotiations in Ireland, Italy, the UK, Germany and Portugal and is hopeful of concluding others this side of Christmas.
“While we hope to finalise more union agreements in the coming months, we cannot rule out occasional industrial action, but we expect their impact to be very limited,” he said.
Ryanair, earlier this month, significantly cut its full-year profit guidance to between €1.1bn and €1.2bn, which would be down from €1.45bn for its last full financial year. It also said, at that time, that further strike action “may require full-year guidance to be lowered further”.
Ryanair also said that it will resist making further share buybacks, pending the outcome of Brexit.
“We view this as a modestly positive update but refrain from getting bullish on Ryanair just yet,” said Merrion analyst Darren McKinley.