Ryanair, Europe’s largest airline, today blamed rising airport charges at Stansted and tougher operating conditions for a 27 per cent slump in third-quarter profits.
The company also gave warning that the worsening economic environment in Europe — combined with oil at nearly $90 a barrel — could hammer next year’s results, predicting that profits might fall 50 per cent to €235 million (£176 million) in a worst-case scenario.
The situation next year is likely to be more difficult because the carrier’s fuel is almost entirely unhedged, which will force it to pay the market rate for oil.
Ryanair said that the high oil price — combined with longer routes and an increased number of flights — would lead to “significantly higher costs”.
Its best-case scenario for 2008-09 was a 6 per cent increase in profits to about €500 million, but the airline also said that there could be a 50 per cent fall in profits if oil stayed high and consumer spending declined.
Advertisement
Michael O’Leary, the chief executive of Ryanair, called the end of the aviation boom last year, voicing concern over a tougher trading environment in Europe.
In the three months to the end of December, Ryanair reported a fall in income from €48 million to €35 million despite a 21 per cent increase in passenger numbers and a 16 per cent rise in revenue.
The airline has cut some fares to keep its aircraft full over the winter but has been hit by higher costs, including a doubling of charges at Stansted, the carrier’s main base, as well as an 18 per cent increase in crew costs.
Mr O’Leary said: “The Civil Aviation Authority stood idly by last year while Stansted airport doubled passenger charges and at the same time delivered abject service to airlines and passengers.”
He also repeated calls on the British Government to end BAA’s monopoly control of London’s airports.
Advertisement
Ryanair carried 12.4 million passengers during the third quarter and ancillary revenues — money raised from extra charges — rose 30 per cent to €111 million.
Overall revenue was €569 million. The company had a one-off gain of €12.1 million from the disposal of five aircraft.
The low-cost carrier now expects to see net income of €470 million for the full year — roughly in line with analyst forecasts.
Mr O’Leary said: “There can be only one competitive response to any consumer uncertainty, and that is for Ryanair to slash fares and yields, stimulate traffic, encourage price-sensitive consumers and promote new routes.
“The airline business is highly cyclical and we have seen these downturns before. They pose unique long-term opportunities for the lowest-cost producer — Ryanair — to grow rapidly.”
Advertisement
Ryanair’s gloomy outlook for the aviation sector forced UK airline stocks lower. British Airways fell 3p to 315p in early trading and easyJet slipped 37p to 429.75p.
Despite the worsening profit figures, Ryanair announced a €200 million share buyback, equivalent to 3 per cent of the company’s stock. This is in addition to the €300 million buyback announced last year.
Meanwhile, Ryanair will begin testing a system in April and May that will allow passengers to use their mobile phones inflight.
The carrier is waiting for regulatory approval before testing the system on 25 aircraft.