Ryanair pledges to cut fares as it misses profit expectations following the affects of terrorist incidents and union strikes
Budget airline Ryanair missed expectations in its full-year profits today as the impact of terrorist attacks on bookings and low oil prices began to take their toll.
The figures
Adjusted net profits came in at €1.24bn (£961m) for the 52 weeks to 31 March, a 43 per cent increase on the previous year, although this missed analysts' estimate of €1.3bn. However, the company's results were in line with its own forecasts.
Revenue was up 16 per cent at €6.54bn, which was marginally below analysts' forecasts of €6.55bn.
Ryanair said its Easter bookings had been adversely impacted by more than 500 flight cancellations following the Brussels terrorists attack and repeated, mostly French, airline traffic controller strikes.
Read more: Airlines will have to cut fares after Brussels attacks, says O'Leary
The airline has warned its first quarter yields will also be hit negatively by cancellations, lower airfares, the early Easter and sterling weakness in the run up to the referendum in June.
The company said it will cut fares by seven per cent, adjusting to a market in which lower airfare prices are required in an era of unrelentingly cheap oil. Ryanair has said its summer bookings are up two per cent already this year, but most of these are at lower fare rates, which could compromise its profits over the season.
The company's share price had risen 1.05 per cent by mid-afternoon trading to 13.51p after the results were released.
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Why it's interesting
The drop in oil prices has continued to hit the aviation sector hard, pushing down air fare prices and forcing airlines to slash prices further to stay competitive. Brent crude prices edged back away from $50 per barrel at the end of last week, and have yet to recover from the price wipe-out of around 70 per cent in 2014. Prices reached a 13-year low in January of this year.
Ryanair has been vocal about its stance on remaining in the European Union in recent weeks. The company wants people to back the Remain camp so much, it is offering cheaper flights home from European destinations on 22 and 23 June so passengers can vote in the referendum.
Read more: Ryanair boss Michael O'Leary speaks out against Brexit
Despite the impact of terrorist incidents in Europe over the second half of its financial year, the company also fell prey to a bomb hoax in Oslo, Norway, in mid-May.
The cut-price flier, which has said profits were hampered partly through strike action, branded French air traffic controller unions "selfish" for striking and has called for bans and tighter regulations on industrial action.
What Ryanair said
Chief executive Michael O'Leary said:
Financial year 2016 was a year in which we delivered significant traffic and profit growth in all four quarters (despite an average oil price of $90 per barrel as a consequence of hedges put in place in 2014) as our Always Getting Better service programme is attracting millions of new customers to our lowest fare/lowest cost model.
Highlights of the past year include average fares cut one per cent to €46.67, net profit up 43 per cent to €1.24bn and being the first airline to carry over 100m international customers in a calendar year.
What others said
"Ryanair has thrown down the gauntlet to its budget airline rivals promising further cuts in air fares as it bids to maintain its market share," AJ Bell Media Relations said.
"Ryanair’s fourth quarter sales were hit by a combination by more than 500 flight cancellations following terrorist attacks in Brussels and air traffic control strikes in France."