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Cheap fuel pain for Ryanair

Monday, February 02, 2015 - 01:49

Ryanair cautioned that profits would only rise modestly in the year ahead as low oil prices help rivals to cut fares. As Hayley Platt reports that's taken the shine off its third profit upgrade in as many months.

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It's up, up and away for Ryanair or at least it should be. Europe's largest airline has raised its profit forecast for the third time in as many months. It now expects to make up to 850 million euros of profit for the year ending in March. That's up from a previous maximum of 830. The Irish airline says it's largely thanks to lower costs and a 25 percent rise in bookings. A new customer-friendly approach is also helping, but FxPro's Simon Smith says it's going to be a challenging time for all airlines. SOUNDBITE: Simon Smith, Chief Economist, FxPro, saying (English): "Yes we've seen oil prices fall and in the bigger picture and slightly more over the last week but I think that does mean that we could see a sort of new price war through the airline sector and that will narrow the difference between Ryanair and others and on that basis." Some airlines are able to lower fares thanks to falling oil prices. But Ryanair's not benefitting because of hedging. It agreed a fixed price of $92 a barrel prior to the recent falls. That's almost double the current cost and it's stuck with the deal until March 2016. Ryanair has other worries too. It's a major stakeholder in another Irish airline - Aer Lingus. IAG is currently bidding to buy them. If successful, it could put further competition pressures on Ryanair going forward. SOUNDBITE: Simon Smith, Chief Economist, FxPro, saying (English): "It's dependent on a number of factors in terms of approval of competition regulators. From that point of view in terms of IAG we're creating another or larger conglomerate it gives that group a bigger hold on BA and so I think that's where the concerns will lie." Ryanair's shares fell more than 4 percent after the caution on next year. But it should be able to make gains from the rise in the pound against the euro.

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Cheap fuel pain for Ryanair

Monday, February 02, 2015 - 01:49