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Ryanair plunges to quarterly loss, hit by drop in fares

Ryanair plunges to quarterly loss, hit by drop in fares

DUBLIN (Reuters) – A six percent drop in fares plunged Ryanair to a quarterly loss and Europe’s biggest budget airline warned overcapacity was likely to continue driving prices lower, albeit at a slower pace. FILE PHOTO: A Ryanair aircraft lands at Manchester Airport in Manchester, Britain, May 26, 2015. REUTERS/Andrew Yates The Irish company also

DUBLIN (Reuters) – A six percent drop in fares plunged Ryanair to a quarterly loss and Europe’s biggest budget airline warned overcapacity was likely to continue driving prices lower, albeit at a slower pace.

FILE PHOTO: A Ryanair aircraft lands at Manchester Airport in Manchester, Britain, May 26, 2015. REUTERS/Andrew Yates

The Irish company also said on Monday Chief Executive Michael O’Leary would move over the next 12 months to lead a new group structure on a five-year contract, overseeing the firm’s four airline subsidiaries.

Chairman David Bonderman, whose reappointment to a role he has held for more than 20 years was opposed by 30 percent of shareholders last year, plans to stay on until the summer of 2020, when he will be replaced by Stan McCarthy, the former CEO of Irish food company Kerry Group, Ryanair said.

Lower-than-expected winter fares led Ryanair two weeks ago to cut its profit forecast for the year ending March 2019, and it reiterated on Monday it could not rule out a further downgrade, noting possible uncertainty from Brexit.

The firm, which makes most of its profit in the summer, said fares were 1 percent down so far for April to September with just under a fifth of bookings in place, pointing to a “flat to slightly down-ish” trend for the year ending March 2020 if short-haul overcapacity in Europe continues.

Ryanair’s shares, down over 40 percent from a peak of 19.39 euros 18 months ago before a wave of industrial relations issues, were 3.3 percent lower at 11.01 euros in early trade.

“We’ve seen commentary from some low cost competitors with very few bookings in place for summer 2019 promising enormous fare growth,” O’Leary said.

“Frankly with overcapacity in the European market, we don’t see that, we do not share the optimism and in some cases the irrational optimism. They have been over optimistic before and on balance we think we should be cautious.”

Ryanair’s new group structure will be similar to that of British Airways-owner IAG, with four airline subsidiaries – the main Ryanair carrier led out of Dublin, its Austrian and Polish airlines Laudamotion and Ryanair Sun, and Ryanair UK – each led by their own CEOs and management teams.

O’Leary will oversee cost efficiency, capital and aircraft allocation between the airlines in his new role, as well as potential small scale acquisitions, all on reduced basic pay and a lower bonus.

In its fiscal third quarter, Ryanair said strong traffic growth of 8 percent was offset by a 6 percent decline in average fares while a 26 percent increase in ancillary revenues to 557 million euros was offset by higher fuel and staff costs.

The resulting 20 million euro ($23 million) loss – excluding 46.5 million euro start-up losses at Laudamotion – compared with a 106 million euro profit in the same period a year ago.

Ryanair reiterated its 2018-19 profit forecast of 1-1.1 billion euros, which would be down by as much as 31 percent on the previous year. In an October profit warning, the company had also blamed a summer of strikes and higher oil prices.

Pilot unions in some countries have suspended talks over pay conditions in protest at the threat of base closures and while O’Leary said the airline had made “very good progress” in those talks, he could not rule out further base cuts if fares keep falling.

Reporting by Padraic Halpin; Editing by Shreejay Sinha and Mark Potter

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