Ryanair has lowered its full year profit guidance (excluding Laudamotion) from a current range of €1.25bn - €1.35bn, to a new range of €1.10bn - €1.20bn mainly due to the impact of pilot and cabin crew strikes. The airline said that it had lower traffic and weaker close in fares in September, caused by two days of coordinated pilot/cabin crew strikes in Europe, as well as lower fares during the third quarter as forward bookings (particularly for the Oct school mid-terms and Christmas) and customer confidence are affected by fear of further strikes, added to that is the higher EU261 care and re-accommodation costs arising from these recent strikes; and higher prices ($82pbl) for unhedged oil (10%), which are all impacting profits.
Ryanair noted that Q2 and Q3 traffic and fares will be somewhat lower than expected largely as a result of these two recent – five country– strikes, which it says are “being incited by competitor employees, despite the fact that Ryanair has agreed to meet union demands for local contracts, local law, and a five week arbitration with pilots in Germany when the VC Union sought a prolonged five month arbitration”.
Ryanair’s Michael O’Leary said: “Like a number of other EU airlines, we have decided to trim our winter 2018 capacity (by 1%) in response to this lower fare, higher oil and higher EU261 cost environment.”
Ryanair is implementing winter cuts from November 5, which includes closing its four aircraft Eindhoven base, but most routes to/from Eindhoven will continue on overseas based aircraft; closing its two aircraft Bremen base with most routes continuing on non-German aircraft; and cutting its five aircraft Niederrhein base to three aircraft with most routes continuing on the remaining three aircraft.
Leary said that “all affected customers have been contacted by email/SMS this morning and will be re-accommodated on other flights or refunded as they so wish. We will also now consult with our pilots and cabin crew at these three bases to minimise job losses. We expect to offer our pilots vacancies at other Ryanair bases but, as we have a large surplus of winter cabin crew, we will explore unpaid leave and other options to minimise cabin crew job losses.”
Ryanair now guides FY19 PAT in a new range of €1.10bn to €1.20bn (previously €1.25bn to €1.35bn); it is now guiding H2 fares down 2% (previously flat), with a fuel bill that is approx. €460m higher (previously €430m) than last year and “Other Costs” will be negatively impacted by higher EU261 care and re-accommodation costs. The slower traffic growth in H2 will cut FY19 traffic to 138m (previously 139m excluding Laudamotion).
Ryanair added that it cannot rule out further disruptions in Q3, which “may require full year guidance to be lowered further and may necessitate further trimming of loss making winter capacity”.