Both Ryanair and Air France-KLM have announced worse than expected figures with Ryanair suffering a 29% decline in profits with fuel hedges and FX blamed, but CFO Howard Millar pointed more than once in his announcement to the fact that people have less money to spend. Ryanair has for many years made all of its money away from the aircraft seat price and that strength is now a weakness as passengers curb their enthusiasm for add-ons. Ryanair has resisted wholesale increases in seat prices but with a fuel hedge and the euro weighing it down it may have little choice but to increase fares higher and faster than previously planned. That for Ryanair is a danger as it puts them in the territory of other airlines
Meanwhile, Erik Venter, CEO of Comair, has warned over the recent drive to invest in East African aviation. He warns that the exuberance over Africa’s higher economic growth rates relative to many other markets will “result in a bloodbath in East Africa”
"There is a bit of mad rush to get into Africa. While some African markets have, at the moment, better growth rates compared with many places in the world, it’s coming off a very low base," Venter said. "I think there is a little bit too much hype around it right now and it could be a bit of a dangerous situation."
The current situation in Africa is similar to what happened in India a few years ago, which claimed a few early scalps when it was revealed that the market was not ready for new airlines. As a result, Comair is not seeking new markets in East Africa.
This opinion is shared by many in the industry although for investors located in the EU, opportunities for yield outside of Europe are too tempting to resist for the moment.