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Abu Dhabi, UAETuesday 13 November 2018

Ryanair profits plummet as industrial action bites

Ireland-based discount airline posted a 20 per cent drop in first-quarter earnings, as customers put off by strikes and cancellations

Ryanair has seen its earnings hit by a wave of walk-outs with more planned. Reuters
Ryanair has seen its earnings hit by a wave of walk-outs with more planned. Reuters

Labour strife is starting to weigh on Ryanair.

The discount airline posted a 20 per cent drop in first-quarter profit, and warned that sporadic walkouts by trade unions, along with regional traffic-control strikes, are starting to make customers hesitant to book flights.

That’s fed into a drop in prices, just as fuel costs rise and the Irish carrier shells out for 20 per cent pay increases already granted to some of its pilots. Fares fell 4 per cent during the period ended June 30, and the pricing environment remains weak, Ryanair said. The company kept its profit full-year outlook, but said it was “heavily dependent” on fares this quarter, crew strikes, traffic-controller strikes and other wild cards such as Brexit.

While the airline had been able to re-accommodate passengers whose flights were cancelled during recent strikes by Irish pilots, “the real impact is going to be on uncertainty in relation to the forward booking curve,” chief financial officer Neil Sorahan said on Monday.

Profit after taxes fell to €319 million (Dh1.37bn) in the three months ended June 30, the company said.

The drop was due to “lower fares, the absence of half of Easter in the quarter, higher oil prices and pilot costs,” chief executive Michael O’Leary said. Traffic grew despite over 2,500 flight cancellations caused by air traffic control staff shortages and strikes, he said.

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Ryanair left unchanged guidance set out in May that net income for the year ending March 2019 will decline for the first time since 2014, to a range of €1.25bn to €1.35bn.

The airline is facing strikes by its Irish pilots and by Spanish, Portuguese, Belgian and Italian flight attendants, who plan walkouts this week. Germany’s Vereinigung Cockpit pilot union is also balloting members who fly with Ryanair, with the outcome due later this month.

This summer’s disruptions mark the first major industrial action the budget carrier has seen, after it agreed to accept unionisation in the face of a staffing crunch last year. A four-hour German pilot strike in December - Ryanair’s first-ever strike - led to delays but no cancellations. The airline said in May, before the latest round of labour opposition, that costs associated with recognising labor groups would reach €100m this fiscal year.

First-quarter revenue rose 9 per cent to €2.08bn. Analysts had expected revenue of €2.04bn, according to eight estimates compiled by Bloomberg. Ancillary revenue, including from passengers paying extra for priority boarding, rose 25 per cent.

Ryanair this month won EU approval to take a majority stake in the Austrian airline LaudaMotion. The Irish carrier said Monday that LaudaMotion would lose about €150m in its first year but “these results will improve substantially to break even by year 3 of operations.” Ryanair said in May that LaudaMotion will need almost €100m in start-up costs and operating losses over the next two years.