- Ryanair to cut fares by 15pc & add 1m seats per month
- 6m seats in winter instead of 4m.
- Profits expected to grow by 7pc instead of previously guided 12pc
- Promise of lower fares as 117m expected to fly in 2016
- Half of summer tickets were sold before Brexit hit the value of sterling.
Poor forward bookings, particularly in England, and the collapse of sterling have led Ryanair to reduce its full year guidance by 5pc to €1.30bn to €1.35bn range but has made no adjustment in its efforts to increase annual passenger traffic to 117m and overtake Lufthansa group as Europe’s biggest airline.
Depsite this, Michael O’Leary promised to pump a million seats a month into a weak winter market and slash fares by 15pc.
Full year are profits expected to grow by 7pc instead of previously guided 12pc. Guidance was reduced from a previous range of €1.375bn – €1.425bn to a new range of €1.30bn – €1.35bn. Ryanair says the primary cause of this slightly lower growth in full year profitability is the 18pc fall of sterling post Brexit which will reduce H2 average fares by between 13pc to 15pc as opposed to the previously guided 10pc to 12pc.
Ryanair had held firm on its profit guidance in the face of the initial fall in sterling but that appears to have changed in the light of weaker H1 bookings, below-expectation advance bookings and the devastating drop in the currency on October 5. It was helped by the fact that half of its summer tickets were sold before Britain ‘s Eurocide.
Ryanair intends lifting its European short-haul market share to 30pc by 2024, up from 14pc. Extracting from the airline’s own figures, currently Ryanair flies 21m passengers in England where it has a 17pc market share, behind Italy’s 22.1m (26pc market share) and ahead of Spain’s 18.5m (18pc market share). Ryanair flies just 5.6m passengers in Germany where it has a 5pc market share.
Ryanair intends adding 6m seats over the six months to the end of March, up from an earlier forecast of 4m. This will mean a further fall in fares, which fell below €40 on average this year for the first time since 2008. Ryanair deliveries from Boeing have resumed and the airline will take delivery of 50 Boeing 737-800 this winter, springboarding a massive expansion which is to be concentrated in Germany as opposed to 36 last winter.
Deliveries resumed on September 7, with five aircraft arriving in September, seven in October, seven in November, five in December and 25 in the new year. Between five and seven aircraft will be handed back to lessors and Ryanair is also seeking additional aricraft and is in the market for end of the line 737-800’s “at the right price” for 2018-9.
Overall aviation capacity in Europe is set to increase by 8pc this winter, the highest in a decade.
Ryanair said in a written statement: H1 fares were marginally weaker at -10pc compared to previously guided -9pc. However, these lower fares will be partly offset by a better than expected cost performance. Ryanair now expects full year ex-fuel unit costs to decline by 3pc compared to previously guided 1pc. Ryanair also expects full year load factor to be 1pc better than guided at 94pc, and now expects that full year traffic will increase to 119m, which is 12pc growth on last year’s 106m customers.
Michael O’Leary said: “The recent sharp decline in Sterling post Brexit (which accounts for approx. 26pc of Ryanair’s FY17 revenues) will weaken H2 yields by slightly more than we had originally expected. While higher load factors, stronger traffic growth and better cost control will help to ameliorate these weaker revenues, it is prudent now to adjust full year guidance which will rise by approx. 7pc (over FY 2016) rather than our original guidance of 12pc. This decline is primarily due to the impact of weaker Sterling on our H2 fares. We would caution that this revised guidance remains heavily dependent upon no further weakness in H2 fares (-13pc to -15pc) or Sterling from its current levels (€1 = £0.9050). Ryanair will continue to be load factor active and price passive throughout the winter season at these low prices.”
