(Bloomberg) -- Labor strife is starting to weigh on Ryanair Holdings Plc.
The discount airline posted a 20 percent drop in first-quarter profit, and warned that sporadic walkouts by trade unions, along with regional traffic-control strikes, are starting to make customers hesitant to book flights.
That’s fed into a drop in prices, just as fuel costs rise and the Irish carrier shells out for 20 percent pay increases already granted to some of its pilots. Fares fell 4 percent during the period ended June 30, and the pricing environment remains weak, Ryanair said. The company kept its profit full-year outlook, but said it was “heavily dependent” on fares this quarter, crew strikes, traffic-controller strikes and other wild cards such as Brexit.
While the airline had been able to re-accommodate passengers whose flights were cancelled during recent strikes by Irish pilots, “the real impact is going to be on uncertainty in relation to the forward booking curve,” Chief Financial Officer Neil Sorahan said by phone on Monday.
Profit after taxes fell to 319 million euros ($374 million) in the three months ended June 30, the company said in a statement.
The drop was due to “lower fares, the absence of half of Easter in the quarter, higher oil prices and pilot costs,” Chief Executive Officer Michael O’Leary said in the statement. Traffic grew despite over 2,500 flight cancellations caused by air traffic control staff shortages and strikes, he said.
Ryanair left unchanged guidance set out in May that net income for the year ending March 2019 will decline for the first time since 2014, to a range of 1.25 billion euros to 1.35 billion euros.
The airline is facing strikes by its Irish pilots and by Spanish, Portuguese, Belgian and Italian flight attendants, who plan walkouts this week. Germany’s Vereinigung Cockpit pilot union is also balloting members who fly with Ryanair, with the outcome due later this month.
This summer’s disruptions mark the first major industrial action the budget carrier has seen, after it agreed to accept unionization in the face of a staffing crunch last year. A four-hour German pilot strike in December -- Ryanair’s first-ever strike -- led to delays but no cancellations. The airline said in May, before the latest round of labor opposition, that costs associated with recognizing labor groups would reach 100 million euros this fiscal year.
First-quarter revenue rose 9 percent to 2.08 billion euros. Analysts had expected revenue of 2.04 billion euros, according to eight estimates compiled by Bloomberg. Ancillary revenue, including from passengers paying extra for priority boarding, rose 25 percent.
Ryanair this month won EU approval to take a majority stake in the Austrian airline LaudaMotion. The Irish carrier said Monday that LaudaMotion would lose about 150 million euros in its first year but “these results will improve substantially to break even by year 3 of operations.” Ryanair said in May that LaudaMotion will need almost €100m in start-up costs and operating losses over the next two years.
--With assistance from Benjamin Katz.
To contact the reporter on this story: Kaye Wiggins in London at kwiggins4@bloomberg.net
To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net
©2018 Bloomberg L.P.
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