Ryanair announced a record annual profit on Tuesday in a vindication of its strategy of cutting fares to boost market share, and said it would turn up the heat further on rivals.

Its warning to competitors came as one of them, British Airways, was counting the cost of a huge IT failure that left 75,000 passengers stranded over a holiday weekend.

Ryanair, Europe’s largest airline by passenger numbers, has helped drive down short-haul ticket prices in Europe by increasing its capacity by 33 percent, or about 30 million seats, in the past two years.

Its cost base, widely acknowledged as the lowest of Europe’s major carriers thanks to low plane purchase, maintenance and staff costs, has allowed it to undercut rivals while still making a profit.

The Irish airline made a profit after tax of 1.3 billion euros (£1.1 billion) in the year to the end of March, in line with analyst forecasts, even as it slashed ticket prices to fill almost 14 million seats added during the period.

“I take comfort from the fact that we can increase profit in a year where fares fall by 13 percent,” Chief Executive Michael O’Leary told analysts.

“We have seen profitability double … over a three year period and frankly I see no reason why that trend won’t continue.”

FARE CUTS SLOWING

In the coming year, Ryanair is set to slow the pace of capacity growth to around 8 percent, or 10 million seats, and expects ticket prices to fall by 5-7 percent.

That will see its average fares fall by around 5 percent over the key summer months, likely putting pressure on rivals.

“I see a lot of airlines talking up the first half of the year and talking up (revenue per passenger) yield performance. I think that is a little overdone,” O’Leary said.

 

 

Source: Reuters