Airline Price War Looms As Ryanair Cuts Fares

An airline price war is looming this summer after Ryanair said it was to cut fares by 7%.

The no-frills carrier announced the move following a similar step by its biggest rival, easyJet, as demand for flights continues to be dampened by the terror attacks in Paris and Brussels.

Ryanair pledged it would win any price war while unveiling its annual results, which showed record profit after tax of £959m.

Ryanair said that while passenger numbers rose 18% in the year to March to 106.4 million, it had cancelled more than 500 flights during its final quarter as a result of overseas terrorism and French air traffic control strikes.

Average fares fell by an average 1% over the year - helped by falling fuel costs though Ryanair responded to weaker demand by cutting flight costs most aggressively in the second half of the year.

The airline said it expected its fuel bill would fall by £154m in the current financial year and that would help it trim fares.

Robin Byde, a transport analyst at Cantor Fitzgerald, said: "Ryanair is a major player in many of the markets and airports it flies to. If it cuts prices, other airlines will have to respond to that."

Earlier this month, easyJet said it would look at price cuts so it was "able to offer its customers even better value fares this summer".

Ryanair chief executive Michael O'Leary said: "If other airlines want to compete with us on price, then we will lower our prices again.

"If there is a fare war in Europe, then Ryanair will be the winner".

It (Other OTC: ITGL - news) opens the prospect of a period of falling prices for customers - with flight operators joining holiday firms in shifting summer sun capacity from countries such as Turkey towards Spain and Portugal instead.

Numis Securities analyst Wyn Ellis predicted cheaper prices for holidaymakers this summer.

He said: "This is because of the combination of growing capacity, slowing demand and lower oil prices that cut back on airline costs (Other OTC: UBGXF - news) ."