Ryanair (RYA.IR) expects summer fares to be significantly lower than last year after the budget airline’s profits plunged by almost 50%.
Ticket prices fell 15 percent in the three months to June after CEO Michael O’Leary was forced into a series of sales to fill the company’s 500 planes. The average price fell 15 percent year-on-year to about 42 euros (35 pounds).
Ryanair now expects “significantly lower” airfares between July and September than last year, rather than “the same or slightly increasing” airfares as previously.
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The typical Ryanair fare was €41.93 in June, compared to €49.07 last year. Special fares now cost £19.99 or £29.99.
The company said cost-conscious passengers were reducing their flight costs and that the timing of the Easter holidays had also had a negative impact on earnings.
“We have tried to close some low-cost seats and increase prices for passengers in recent weeks, but have met with resistance,” O’Leary said.
Chief Financial Officer Neil Sorahan said Ryanair had struggled to implement higher fares after raising prices by more than 20 percent last year.
Sorahan said: “There is no lack of demand, in fact it is stronger than ever. But people are more cautious about what they do with their money.
“They like to spend money and travel in large numbers. They are just a little more frugal and allow themselves a little more breathing room.”
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Analysts said further price cuts would put pressure on Ryanair’s rivals to do the same.
“More aggressive discounting by Ryanair is likely to have a negative impact on the peak quarter pricing outlook for the rest of the industry,” said Gerald Khoo, analyst at Liberum.
Europe’s biggest airline reported a profit of 360 million euros (303 million pounds) in the spring quarter, down 46 percent from the same period last year, even though passenger numbers rose 10 percent to 55.5 million.
The disappointing results, which were below analysts’ estimates, caused the low-cost airline’s share price to fall 16 percent on Monday.
Ryanair expects strong demand this summer and is expected to grow by 8 percent overall in the current financial year.
The low-cost airline said ongoing problems with the supply of Boeing and Airbus aircraft would slow capacity and drive up prices until the end of the year.
Ryanair also said it had not yet quantified the cost of disruption caused by Friday’s global IT breakdown, which hit the aviation industry hard and led to the cancellation of thousands of flights worldwide.
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