Ryanair profits rise despite cancellations crisis

Ireland’s troubled Ryanair said Monday that quarterly net profits rose 12 percent despite a cancellations crisis, but warned Britain was under-estimating the risk of “serious disruption” to flights following Brexit.

Profit after tax increased to 106 million euros ($132 million) in the group’s third quarter, or three months to December, from a year earlier, the Dublin-based carrier said in a statement. Passenger numbers grew six percent to 30.4 million people.

In another boost, the group forecast passenger traffic would climb eight percent to 130 million for the full year which ends in March 2018. That was upgraded from previous guidance of 129 million.

And Ryanair also announced a 750-million-euro share buyback which will begin this month.

“We are pleased to report this… increase in profits during a very challenging third quarter,” said chief executive Michael O’Leary.

Investors seemed unmoved, with Ryanair shares down more than 3 percent in morning trading in Dublin.

– ‘Rostering failure’ –

The outspoken boss once more acknowledged Ryanair’s “pilot rostering failure in September”.

Ryanair suffered a troubled end to 2017, being forced to cancel 20,000 flights through to March this year, mainly because of botched holiday scheduling for pilots.

The results on Monday came one week after Ryanair signed an agreement to recognise the British Airline Pilots Association (BALPA), reversing its historic hostility towards trade unions.

This after the carrier said that its UK-based pilots had accepted pay increases of up to 20 percent.

“It became clear in December that a majority of pilots wanted to be represented by unions,” O’Leary said.

“In keeping with our policy to recognise unions when the majority of our people wanted it, we have met pilot unions in Ireland, UK, Spain, Germany, Italy, Portugal, Belgium and France to discuss how we can work with them on behalf of our people.

“We have successfully concluded our first recognition agreement with BALPA in the UK.”

He added: “As we finalise union discussions along similar lines to that agreed in the UK, we expect some localised disruptions and adverse PR so investors should be prepared for same.”

Similar talks will be held with cabin crew unions.

The cancellations fiasco triggered pilots’ demands for better working conditions and representation, with some departing for other carriers.

As a result of pay hikes, staffing costs are set to jump by 45 million euros in the current 2017-2018 year.

And looking ahead to next year, total costs will rise as the fuel bill jumps by more than 300 million euros and the wage bill soars by another 100 million euros.

Hargreaves Lansdown analyst Laith Khalaf said Ryanair was bracing for even more turbulence.

“The dials are moving in the right direction at Ryanair, but Michael O’Leary has switched the fasten seat belt sign on,” said Khalaf.

“The low-cost airline is bracing for a significant increase in staff pay, continued low air fares, and the potential for industrial action as it negotiates with pilot unions across Europe.”

Ryanair shareholders appeared to trade more on the outlook than the results, with the company’s shares falling 3.3 percent.

“Traders place a lot more value in which the company is going over where the company was, and the less the optimistic outlook has prompted selling of the stock,” said market analyst David Madden at CMC Markets UK.

– Brexit warning –

Ryanair meanwhile warned that the British government was “under-estimating” the risk of flight disruptions following Britain’s departure from the EU next year unless the uncertainty of its future relations are cleared up quickly.

“There remains a worrying risk of serious disruption to UK-EU flights from April 2019 unless a UK-EU bilateral or transitional arrangement is agreed in advance of September 2018.

“We, like other airlines, need clarity on this issue… and time is running out for the UK to develop and agree these solutions.”

Ryanair itself decided last month to apply for a British operating licence as part of its Brexit contingency plans, in case Britain leaves the European Union next year without an aviation deal.

Britain accounts for about one-quarter of revenues earned by the Irish no-frills airline.

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