Ryanair a low-cost Irish airline has its headquarters in Swords, Dublin, Ireland. The chief executive Michael O’Leary declared the profit of the financial year was down by 29% that is €1.02 billion or £0.9 billion. This according to him was expected as he revises his monthly supervision before the final yearly results.
The loss as predicted by its executive was not overnight. It was estimated during the beginning of the year. O’ Leary estimated the profits to be down by €1.25 billion – €1.35 billion. In fact, his predictions were being more cautious making the airlines share price fall only by a third.
The burnt is not worn by Ryanair as its competitors also have seen their share prices being fall. Some of the smaller airlines even had to shut down. Ryanair’s average low fare were down by 6% to €37 affecting all. Michael O’Leary takes pride in mentioning that his company’s balance sheet is the best in the aviation industry. With this the company affords €700 million share buy back.
While many competitors in aviation industry have warn of a much bad trading due to various factors like overcapacity being one. The other major one being the Brexit effect. As many European travellers are holding back their bookings in fear of the consequence.
Once a leader in the financial race, Ryanair has been finishing nearly last. Is it due to cancellation and strikes of flight in 2017? Is the company under the grips of unionised labour? The explanation might be myriad with last year profit margin being just 13% as by Ryanair’s standard.
The airline like any other low-cost airlines depends on its additional or ancillary revenue. This is the contribution starting from priority boarding, car hire deals, overpriced flights to extra pay for luggage. This has grown to become a third of the total. This extra spending, 11% to €17 rose per passenger. It has been accounted that any disruption in this upward trend would lead to a major setback. Meanwhile the late delivery of Boeing’s 737 Max aircraft will delay fuel efficiency until 2021.
This grounding has forced Ryanair cutting around a million seats for the year ending in March 2020. But it still plans to fly 153 million passengers in the said period an up from 139 last year. Their strategy according to their executive is to keep on adding capacity as fast as they can and in all the sectors. This no- frill European airline with lower fares are cynical and are likely to emerge as winners in this sector, thus setting an example.
Though this time O’Leary has opted for wide range in last profit that is anything between €750 million to €950 million. As Ryanair’s performance on financial sector is becoming hard to predict. The good news for the company is that the investors particularly those investing in Ryanair seems convinced with O’Leary’s methods. As long-term opportunity seems to be in their court even if it has to bear more burns today.