Air fares will continue to fall says Ryanair

[February 2nd 2009]

Lower air fares are on the way says low cost airline Ryanair as it reports a loss of €102 million for the third quarter.

During the third quarter Ryanair reports that its average fares fell by 9% to €34 as passenger number increased by 13% to 14 million. The budget airline says the trading loss in Q3 was almost entirely due to a €136 million increase in fuel costs.

But Ryanair says it will benefit from much lower oil costs in Q4. Unlike other airlines it did not hedge on oil prices and has benefited from the fall in oil prices since they reached a peak in the summer.

Ryanair expects average air fares to fall by 20% in Q4 due to its cheap fares promotions, the fall in the value of the pound and the impact of the recession. It still expects to make a loss in Q4 but says this will be smaller than anticipated due to lower oil costs and continuing reductions in non oil operating costs.

“Looking forward into fiscal 2009/10, Ryanair will enjoy significantly lower oil costs thanks to our recent hedging programme, when most of our competitors are already hedged at much higher prices,” says Ryanair CEO, Michael O’Leary.

“We intend to use this cost advantage to again lower fares. These lower prices will drive Ryanair’s traffic growth, maintain high load factors (and ancillary sales) and capture market share from higher cost fuel surcharging competitors,” O’Leary adds.

The Ryanair boss says he expects fares to fall by over 10% next year, although if the recession deepens it could be worse than this.

“However the 38% reduction in oil prices which our fuel hedging has secured will ensure that Ryanair returns to substantial profitability next year, when many of our competitors will be reporting losses,” O’Leary predicts.

O’Leary says the cuts in flights and capacity instigated by many of Europe’s flag carrying airlines is creating enormous opportunities for Ryanair at many of Europe’s larger airports as these airports compete in order to reduce charges.

“The longer and deeper this recession, the better it will be for the lowest cost producers in every sector. Like Lidl, Aldi, Ikea and McDonalds, Ryanair, is the lowest cost provider, by a distance, in the European airline industry, and we are poised for substantial traffic and profit growth in the coming year as the recession forces millions of passengers to focus on price,” O’Leary concludes.

Written by: Nick Purdom

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