National airline Ryanair has posted a 12% increase in profit in the three months to the end of December.
The increase is good news for the company as rivals EasyJet hailed a revenue spike in the final three months of 2017, and comes despite widespread disruption caused by the airline’s relations with its pilots in September, which announced thousands of flight cancellations due to a shortage of standby pilots.
The airline has also warned that possible further disruption in the months ahead and said it was not optimistic about average fares in European short-haul in the summer.
Ryanair chief executive Michael O’Leary said: “We do not share the optimism of competitors and market commentators for summer 2018 fare rises. We would, even at this early date, urge extreme caution on investor and analyst assumptions for fares” in the year to March 2019.
“We are fully prepared to face down any such disruption if it means defending our cost base or our high productivity model.”
Ryanair said its average fares in the final three months were in line with forecasts, falling 4%, but revenue for optional extras such as extra bags and priority boarding rose 12%.
The airline also said its profit after tax for the quarter was €106 million, up 12% from a year ago and ahead of a consensus forecast of €101 million.
Ryanair reiterated its forecast that it would make a profit after tax of between €1.4 billion and €1.45 billion in its financial year, which ends on March 31, 2018.
Laith Khalaf, senior analyst, Hargreaves Lansdown, said:‘The dials are moving in the right direction at Ryanair, but Michael O’Leary has switched the fasten seat belt sign on. The low-cost airline is bracing for a significant increase in staff pay, continued low air fares, and the potential for industrial action as it negotiates with pilot unions across Europe.
“Last year’s dispute with pilots will have a lasting impact on the airline, with staff costs now expected to ratchet up by a cool €100 million next year, as a result of the pay agreement reached with pilots. Ryanair has also been obliged to engage with unions in several European countries, which it warns may cause further localised disruption to flight schedules.
“However the 2017 flight cancellations don’t appear to have dented passenger demand, and while air fares may be falling, Ryanair is finding ways to squeeze extra revenues out of its customers. Like its rival easyJet, the airline continues to see growth in sales of added extras such as reserved seating and priority boarding. To that end a new baggage policy looks set to increase the attraction of priority boarding for those customers who want to take their luggage into the cabin, and avoid waiting to pick it up.
“The European airline industry is fiercely competitive right now, but weaker operators are falling by the wayside, which presents opportunities for stronger players like Ryanair. For the foreseeable future though, it looks like it’s going to be a bumpy ride.”