Ryanair Airlines, known for its low-cost services, recently took a huge hit, with its annual profits declining to a four-year low of £832 million. Even though the low-cost airline reported that more than 142 million customers rendered their services across Europe in this financial year till March 31, which had risen up to 9 percent as compared to last year. Yet, it was observed that the profits had dropped by almost a third. A variety of reasons are reported to be held the cause of this sudden decline of this prominent airline.
Low fare takings
Due to intense competition on short-haul journeys, the average fare that Ryanair used to charge their customers was pushed down by 6 percent, costing about £32. This proves to be one of the reasons behind its decline in profits.
The rise in fuel costs
Due to as much as 23 percent increase in fuel and oil prices, the airlines company now has to spend £ 2.1 billion on fuels alone. It has warned that the bill of fuel will further rise by 19 percent this year, or £ 403 million, to £2.5 billion.
It was also reported that more than 28 percent of profits than usual were spent over staff salaries this year. This amounted up to £829 million and this higher than usual amount was spent after a number of deals with unions in order to avert strikes. This exhausted much of its profit, leading to this huge amount of loss. The Chief Executive of Ryanair airlines, Michael O’ Leary, further stated on the issue that the decline of prices will keep falling in the UK and Germany.
Easter holiday excluded from financial year
Michael O’ Leary also stated that one of the reasons for the profits turning out to be as low as £832 million is that Easter holiday, the time of the year when holidaymakers make the most vacation plans, fell outside what is counted as financial year. Therefore, the time when sales actually occurred was not counted, making the overall profit count to be lower that it has ever been.
Apprehension regarding Brexit
Other travel companies, such as Tui and Easyjet, further expressed their apprehension regarding a hard Brexit, that was likely to occur in March as one of the reasons why customers had put off their bookings for summer holidays in abroad early in the year.
Ryanair also reported that while the profits associated with fare taking and rise in fuel prices have dropped, the other add-on services are slowly making up for it. For instance, this year revenues of this company have risen by 6 percent, costing up to £ 6.6 billion. Reserved seating, priority boarding, car hire etc. are some add-ons through which the company earned money. Further, O’ Leary also stated that if there were a fare war to take place between all the competitor companies at this moment, then Ryanair will be the one with the lowest base price.