The month of September was not a good one for Europe’s low-cost airline Ryanair. The company faced lengthy strikes from employees, forcing them to cancel and delay numerous flights throughout the month, causing their profits and stock prices to crash.
According to CNN, they have since had to cut their profit forecast for the year, to between €1.1 billion ($1.27 billion) and €1.2 billion ($1.39 billion). That would be approximately €150 million ($174 million) less than they had previously estimated. The strikes have not yet completely abated, and the airline could be left having to slash it’s profit estimates even more before they return to a full workforce.
The lower traffic led to higher costs for the airline in September, and because of the regular cancellations, fewer people were willing to book seats on their flights for fear of a last-minute cancellation. Ryanair eventually cut their fares in the third quarter in desperation to rake in bookings.
In London, Ryanair stocks also crashed by 10%, leaving them down a total of 22% for the fiscal year. The company also has rising fuel costs to contend with.
CEO Michael O’Leary has been confronting labor unions following the first wave of strikes forced the airline to cancel flights. Unions were only recognized at the airline for the first time in December last year, and so far they have agreements with pilots in Ireland and Italy, but “yet to reach agreements with union officials in countries such as Spain, Portugal, Germany, and Belgium.”
Ryanair probably needs a change at the top https://t.co/H0qW7nmEgP
— Bloomberg Opinion (@bopinion) October 2, 2018
As a result of the discord at Ryanair, their biggest European budget competitor, EasyJet, has been reaping the rewards, gaining all the business that Ryanair has lost. Even so, even EasyJet is exercising caution when it comes to being optimistic about their gains as a result of the fuel hike. The more traditional airlines such as British Airways, Lufthansa, and KLM won’t be hit as hard by the rising costs of fuel. In the long run, this will make the more expensive airlines more attractive to investors watching the markets.
Analysts at Bernstein said Ryanair’s profit warning is “the latest indication that the ‘low cost wins, legacy loses’ story may be coming to an end.”
Following their losses, Ryanair announced on Monday that it would be scaling back, closing their bases at Eindhoven in the Netherlands and at Bremen and Niederrhein in Germany from November 5. Pilots based in those areas are “likely to be offered other positions,” while the airline will also seek to minimize job losses among cabin crew members.