Yahoo Finance Ryanair fares set to fall further as it locks in fuel savings
Ryanair has pledged to cut fares further after it locked in lower prices for its fuel needs for the next two years.
The low-cost carrier said its fuel bill dropped in the past three months even though passenger numbers rose 12pc to 35m. It has also managed to secure further savings that it will pass on to customers.
Chief executive Michael O'Leary said 90pc of its fuel requirements were hedged next year at $49 per barrel and that it had taken advantage of recent price dips to increase its hedging level in the first half of 2019 to 45pc at $48 per barrel, giving it firepower to charge less for its flights. Brent curde, the European benchmark, is currently trading around $48.18 a barrel.
The comments came as the airline showed a 55pc rise in pre-tax profits to €443.7m (£396m) in the three months to June 30.
The steep growth was helped by Easter being absent from the comparable period but being included this year. Mr O’Leary said average fares had fallen by 1pc to €40 partly due to a drop in bag revenue, as passengers opt to carry on two bags for free, and price cuts to encourage travellers to fly after the terror attacks in Manchester and London.
Mr O'Leary said he expected Ryanair's average fares to be down roughly 5pc at the end of the first half of its trading year in September and that pricing in the airline industry would remain competitive. This could add up to an 8pc drop in fares in the second half of its financial year, he said.
The carrier held its guidance for the full year, disappointing bullish analysts, who had hoped Ryanair might upgrade its forecasts for sales and profits. The shares fell as much as 5pc in early trading to €17.27.
Elsewhere, the airline has continued to develop other revenue streams, adding a fifth hotel partner to its Ryanair Rooms business and launching Ryanair Holidays in Italy and Spain in the past few months.
It has also opened its third Travel Lab in Madrid, where it plans to hire up to 250 digital professionals in the next two years. These Labs focus on developing the company’s digital presence and improving its website for customers.
Mr O'Leary also repeated his threat that he would cancel flights as early as autumn 2018 if Brexit negotiators fail to provide airlines with certainty about an aviation agreement.
The move would be a bold one given more than 40m out of its 131m customers will fly to or from the UK this year. In its most recent financial year, roughly 25pc of its revenues were in sterling.
The airline industry releases its schedules around 300 days in advance, meaning flights in April 2019 will be announced around June next year.
At present, carriers can fly between the UK and EU under the EU Open Skies agreement but once the UK leaves the bloc it will no longer be covered by the rules.
The industry has been extremely vocal on the need for the UK to either remain in the agreement or have a new one replicated before Brexit takes hold. A key reason for this is that the aviation sector does not have a legal framework to fall back on such as World Trade Organisation rules, which other sectors could use in the event a trade deal was not negotiated in time.
