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Ryanair warns new COVID variants will hit airlines and travel plans

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Ryanair shares dipped despite returning to profit. Photo: Horacio Villalobos#Corbis/Corbis via Getty
Ryanair shares dipped despite returning to profit. Photo: Horacio Villalobos#Corbis/Corbis via Getty

Shares in Irish airline Ryanair (RYA.IR) traded lower on Monday despite returning to profit as the travel chaos and COVID variants cloud its forecasts beyond the summer holiday.

The Dublin-based budget carrier beat analysts expectations, posting a first quarter profit of €170m ($173m, £145m) for the three months to 30 June thanks to pent-up demand from holidaymakers. That compared with a loss of €273m the year before.

But the airline warned of a "fragile" recovery as the threats of the coronavirus pandemic and the Ukraine war continue to hang over the aviation industry and passengers' travel plans.

"The recovery into the winter is fragile and is very subject to whatever the news flows are around COVID and Ukraine," chief financial officer Neil Sorahan said in an interview on Monday.

It comes as several strains of the fast-spreading Omicron variant have already been detected this year, leading to a surge in infections and hospitalisations in some countries including the UK.

Read more: Airlines accused of selling more tickets than available seats on flights

Europe's largest low-cost carrier said passengers are booking trips much closer to the date of travel than before the pandemic, limiting visibility into demand for September and "almost zero" for the winter, when it tends to lose money.

Despite this, it's sticking with plans to lift capacity beyond pre-pandemic levels even as other airlines trim timetables to cope with a staffing shortages after weeks of delays and cancellations.

Ryanair is raising capacity 15% above the 2019 level this summer in an effort to win market share.

Passenger numbers recovered to 45.4 million in the first quarter, against 8.1 million during the same time period last year. It expects to fly 165 million people in the year started from 1 April, seeking to fill up planes with low fares.

Company shares fell as much as 0.9% in early trade in Dublin on Monday, down 0.7% at the time of writing.

According to the group, profits were still "well below" levels seen in the same quarter before the COVID crisis despite the bounce back.

It added the Ukraine conflict "badly damaged" Easter bookings and fares, which fell 4% versus the same quarter pre-COVID, although average fares for the summer are higher on a three-year basis by a "low double-digit percentage".

CEO Michael O’Leary said it is being hampered by "unprecedented" air traffic control and airport handling disruption, but hopes to run "almost 100%" of its scheduled flights and minimise delays. He expressed concerns over new variants of the coronavirus.

O'Leary, said: "While we remain hopeful that the high rate of vaccinations in Europe will allow the airline and tourism industry to fully recover and finally put COVID behind us, we cannot ignore the risk of new COVID variants in autumn 2022.

"Our experience with Omicron last November, and the Ukraine invasion in February, shows how fragile the air travel market remains, and the strength of any recovery will be hugely dependent upon there being no adverse or unexpected developments over the remainder of 2022-2023."

The airline also warned that rocketing oil prices are set to push up its full-year fuel bill, affecting 20% of its fuel costs that have not been secured in advance.

"The golden age of cheap air travel is over thanks to decade-high oil prices and inflation," said Allegra Dawes, senior analyst at global primary research firm Third Bridge.

"However, Ryanair's fuel hedging policy means they are better positioned to maintain price competitiveness and under less pressure to increase fares over the next 12 months."

Watch: Ryanair records busiest month ever in June

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