Ryanair reports net loss for Q3, despite strong traffic growth

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Ryanair has reported a net 2018 quarter three (Q3) loss of €20m (excluding Laudamotion) as a decline in average fares, higher fuel, staff and EU261 costs hit finances.

This came despite strong traffic growth of eight per cent to 33 million which was offset by a six per cent decline in average fares due to excess winter capacity in Europe. The Irish low-cost carrier also said in Q3 it posted stronger ancillary revenue growth (+26 per cent).

In Q3, revenue reached €1.53 billion, up nine per cent on the €1.41 billion in Q3 2017. The net loss of €19.6 million compared to a net profit of €105.6 million in Q3 2017. The airline said average fares fell six per cent to under €30 in Q3 2017.

Q3 results excluded the €46.5 million exceptional Q3 FY19 Laudamotion loss which Ryanair said was due to mainly due to the very late release of summer 2018 schedules, low promotional fares, expensive aircraft leases and unhedged fuel.

Ryanair chief executive officer, Michael O’Leary said: “While a €20m loss in Q3 was disappointing, we take comfort that this was entirely due to weaker than expected air fares so our customers are enjoying record low prices, which is good for current and future traffic growth.”

The carrier said it expects “more closures and airline failures in 2019 due to overcapacity in the European market, which is causing continued fare weakness”.

Ryanair added the risk of a “no deal” Brexit remains “worryingly high” and while it hopes that “common sense will prevail”, and lead to either a delay in Brexit, or agreement on the 21-month transition deal currently on the table, it has taken necessary steps to protect Ryanair’s business in a no-deal environment.

The airline has obtained a UK AOC to protect three domestic UK routes, and will place restrictions on the voting rights and share sales of non-EU shareholders for a period of time (in the event of a hard Brexit) to ensure it remains at all times an EU owned and EU controlled airline, even if the UK exits the EU without a deal.

Ryanair has also reported that its January traffic grew 11 per cent to 10.3 million passengers, up on the 9.3 million in January 2018 with a load factor of 91 per cent. Laudamotion, which Ryanair took full control over last week, represented 0.3 million the total with a load factor of 89 per cent.

The airline forecasts its FY19 profit guidance will be in a range of €1 billion to €1.1 billion due to lower winter fares, which are expected to fall seven per cent (H2) (compared to a fall of 2 per cent originally forecast); stronger traffic growth, up nine per cent to 142 million; stronger ancillary sales as more customers choose lower cost optional services; and slightly better than expected H2 unit cost performance, mainly lower unhedged oil prices.

The carrier also said it does not share the recent optimistic outlook of some competitors that summer 2019 airfares will rise adding: “In the absence of further EU airline failures, and because of the recent fall in oil prices (which allows loss making unhedged competitors to survive longer), we expect excess short haul capacity to continue through 2019, which will we believe lead to a weaker – not stronger – fare environment.

“Ryanair will continue to be load factor active/price passive in this market, which we expect will lead to lower fares for our customers, robust traffic growth and more casualties among already loss making competitors before the year end.”

Over the next 12 months Ryanair Holdings Plc will also move to a group structure not dissimilar to that of IAG. A small senior management team will oversee the development of four airline subsidiaries; Ryanair DAC, Laudamotion, Ryanair Sun and Ryanair UK, each with their own CEOs and management teams.

Holdings will focus upon efficient capital allocation, cost reductions, aircraft acquisitions and small scale M&A opportunities.

To lead this group structure O’Leary will become Group CEO, a role in which he will concentrate on the development of the group. A replacement CEO of Ryanair DAC, who will work alongside the CEOs of Laudamotion and Ryanair Sun, will be appointed later this year.

The Group CEO will be assisted in Holdings by small group legal and group finance teams and as it expands the Lauda Airbus fleet and takes delivery of over 200 B737 Max aircraft, it believes this group structure will deliver cost and operating efficiencies, while enabling the group to look at other small scale M&A opportunities like the successful development of Lauda.

Meanwhile, O’Leary has also agreed a new five-year contract as Group CEO, which secures his services for the group until at least July 2024.