Even though Ryanair has the lowest unit costs of any European airline, its costs rose significantly over its past financial year – cutting profits to €1.02 billion, a 29% decline compared to the prior year period. Last week, easyJet reported a half year loss of £273 million, while Norwegian and other European airlines troubles have been widely reported.
Fuel is undoubtedly higher but the real impact to the bottom line has been falling yields. Fares are depressed, costs are rising - of course more consolidation will come in Europe. What hasn’t been assessed in great detail is the burden of EU261 on European airlines. Ryanair blamed “repeated ATC staff shortage disruptions in FY19” for the €50m increase in EU261 costs. The airline also attributed a €200 million rise in staff costs - mostly pilots - that also hit its bottom line. Last year, Ryanair and other European carriers actually benefitted from the fall of Monarch and others, which allowed them to pick up passengers that are notably absent from this year’s figures.
It has been said many times before that the European market is ripe for greater consolidation, which will help fares and yields for those that remain. Keeping a healthy balance sheet will be essential for the battle to come post the busy summer period.