Ireland-based low-cost carrier (LCC) Ryanair saw its third-quarter profits fall 8% compared to the same period in the previous year, as geopolitical events pushed more capacity into its market and yields fell.
The LCC reported net profits of €95 million ($102 million) for the third quarter of its financial year ended Dec. 31, down from €103 million last time. Revenue was up 1%, at €1.35 billion.
Despite the drop in 3Q profits, the airline said its guidance for full-year net profits remained unchanged, at €1.3-€1.35 billion.
However, Ryanair said the outlook for the remaining two months of the year was cautious. With Easter, a major period for holidays and short breaks, falling outside the quarter this year, the LCC anticipated 4Q yields to drop by as much as 15% compared to last year.
The airline added that its full-year guidance depended heavily on no further terrorist incidents in Europe causing a drop in close-in bookings.
Barring such unforeseen events, Ryanair said it would carry around 119 million passengers in FY17, up 12% on the previous year’s figure of 106 million. The carrier currently anticipates carrying 130 million passengers in FY18 and is targeting 200 million by FY24.
The airline has a “yield passive, load factor active” policy and its fares fell sharply over the winter. Average fares dropped 17% to €33, down from €40 a year previously, while load factors rose 2% to 95%, a 3Q record. Customer numbers were up 16% at 28.8 million compared to 3Q a year earlier.
A major factor in the drop in fares, and thus yields, was the sharp reduction in European tourists heading to Turkey, Tunisia and Egypt’s Red Sea resorts following terrorist attacks. This saw airlines redeploying capacity into southern Mediterranean markets such as Spain, Portugal and southern Italy.
The volatility of sterling as a result of uncertainty over the UK’s forthcoming exit from the European Union exacerbated this trend, the airline said.
Ryanair anticipates this weakness in pricing continuing into the summer and perhaps beyond.
The carrier said its low-cost base remained a key differentiator between it and its rivals. Non-fuel costs were down 6%, while fuel costs fell 20% per passenger in 3Q. The airline said fuel costs for the remainder of its financial year were 95% hedged at $56 a barrel, while hedging more than 85% of its FY18 fuel at an average price of $49 a barrel. This is anticipated to deliver fuel savings of $65 million in FY18, which will be fed back into lower fares.
A prime aim of Ryanair’s policy is to attract passengers, giving the LCC the opportunity to sell ancillary products, which tend to have higher profit margins than the actual flights, CFO Neil Sorahan said.