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Lower profits and strike threat hit Ryanair

Europe’s biggest low-cost carrier has posted its weakest yearly profit in four years and is faced with the possibility of another strike.

Ryanair has reported its weakest annual profit in four years – and warned that earnings could fall further as Europe’s airlines engage in “attritional fare wars”, CEO Michael O’Leary said.

But lower fares and profitability in the near term are a price worth paying to boost market share and accelerate consolidation, O’Leary argued, as reported by the Reuters news agency.

Lower fares and profit are cyclical, he said, and four or five European carriers are likely to emerge as the winners.

“Our strategy would be to keep adding capacity as quickly as we can in all the markets where we can,” O’Leary said. “Will it be painful for a year or two, yes it will. But will it shake out more of the competition, yes it will.”

Europe’s biggest low-cost carrier had already signalled a fall in profitability, but its profit forecast for the current financial year of between €750 million and €950 million is “considerably worse than expected,” Mark Simpson, an analyst at Ireland’s Goodbody stockbrokers told Reuters.

MAX effect
Ryanair is also being negatively affected by delays in the delivery of the Boeing 737 MAX after its global grounding in March.

Ryanair has 135 MAX 200s on order with options on 75 more. It had been expecting delivery of the first five between April and June but now says it expects them to be in the air by November, with around 50 MAX aircraft flying next summer.

Strike vote
Meanwhile, BALPA, a union representing Ryanair’s British pilots, says it will hold a vote to see if there is support for a strike over pay, according to a letter seen by Reuters.

The budget carrier has stilled disputes with various unions by reaching agreements on pay and allowances, but with BALPA it has not yet moved beyond a recognition agreement.

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