Ryanair warns of slump in traffic growth to 1%

Business Correspondent/Personal Finance Editor

Tuesday 31 July 2012

Ryanair is expecting traffic growth of just 1% between next month and March 2013 as it braces for a winter hit by the austerity squeeze in Europe.

FLYING LOW: Chief executive Michael O'Leary said Ryanair's outlook for the year ahead remained cautious. Picture: Colin Templeton

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SIMON BAIN

The market-leading low-cost airline confirmed yesterday it would go ahead with plans to ground 80 of its 294 planes over the winter due to high fuel costs.

It is still expanding into airports which are keen to attract its traffic potential – the airline has grown business by 6% in the second quarter.

Some existing bases are under pressure, however, with Edinburgh Airport set to lose eight routes in October, although Ryanair's deputy chief executive Michael Cawley told The Herald in May: "If we go ahead with the cuts in Edinburgh as planned, it is very likely we will divert a modest amount of them to Prestwick." The Dublin-based airline has already cut five of its 35 routes at Edinburgh this year, and says the other cuts will go ahead unless it can renegotiate landing charges with the airport's new owner, Global Infrastructure Partnership. Ryanair is already launching a new Polish route in October at Prestwick, where it has reduced frequencies but still has 25 routes and a maintenance base employing more than 250 people. Ryanair, which operates more than 1500 flights a day across 28 countries, has reported an 11% rise in revenues in the quarter to June 30 to £1 billion, as 6% traffic growth combines with a 4% rise in average fares.But the group said a 27% surge in fuel costs was behind a 29% slide in underlying pre-tax profits to £77.5m in the period."Despite this challenging environment Ryanair continues to grow its traffic across Europe while maintaining the lowest unit costs in the airline industry, and generating healthy profits as evidenced by the 8% after tax margin achieved in the first quarter," the group said.Ryanair reported a 15% rise in ancillary sales – which includes baggage and administration fees, as well as in-flight food and drink – to £224m. Ancillary sales now account for 22% of all revenues. The carrier said growth in the first quarter was dampened by the eurozone crisis; the squeeze on consumer spend; and also heavy discounting at new bases including Cyprus, Denmark and Hungary. It will nevertheless press ahead with its 51st base, in Maastricht, Holland, in December, and hopes to add up to two new bases later this year.Micheal O'Leary, chief executive, hit out at the Spanish Government for hiking airport taxes at the start of July, but he welcomed a Court of Appeal decision to dismiss BAA's latest appeal against a Competition Commission recommendation to sell Stansted Airport.He said: "Our outlook remains cautious for the year. We expect full-year traffic to grow 4%.We have no visibility of next winter's yields but expect that continuing austerity, EU recession, and lower yields at new bases will restrain fare growth."The European Commission says it would decide by August 29 whether to clear Ryanair's £525m bid for Aer Lingus.

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Ryanair warns of slump in traffic growth to 1%

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