Ryanair expects eurozone crisis to curb fare rises

Budget airline admits that fare increases will be 'restrained' this winter due to spending cuts and the eurozone crisisRyanair has admitted that fare increases will be "restrained" this winter due to spending cuts and the eurozone crisis, as the budget carrier posted a bigger-than-expected fall in first quarter profits of 29%.The Dublin-based airline said yields ? a proxy for average fares ? will be held back this winter, despite it having posted double-digit fare increases in recent years, reflecting longer routes and higher fuel costs. "Currently, we have no visibility of next winter's yields but expect that continuing austerity, EU recession, and lower yields at new bases will [continue] to restrain fare growth," said Michael O'Leary, the airline's chief executive.Ryanair's figures for the three months to 30 June fell short of market expectations this morning as the airline reported a net profit of ?99m (�77m), down nearly a third lower than the same period last year and below consensus forecasts of ?114m. Revenues rose 11% to ?1.3bn while passenger numbers climbed by 6% to 22.5 million, underlining the airline's power in the European short-haul market. Analysts said the profit shortfall was due to fare revenues coming in lower than expected, with fare revenue growth coming in at 4% when some analysts were expecting closer to 10%. The bugbear of Ryanair passengers ? ancillary charges such as baggage check-in levies ? performed more strongly and rose 8%. Ryanair shares fell 2.6% to ?3.80 in early trading.Explaining the slow growth in fare income, O'Leary cited the same factors that are expected to hold back fares at the end of the year. He said: "Q1 yield increases were dampened by the EU -wide recession, austerity measures, and heavily discounted fares at our new base launches in Cyprus, Denmark, Hungary, Poland, Provincial UK and Spain."In the past O'Leary has talked of ending bargain-basement fares at Ryanair, as slower passenger growth is offset by higher revenues per passenger. In an interview with the Observer two years ago, O'Leary said the carrier will have to recoup its costs as it moves into bigger airports closer to city centres in order to woo higher-paying passengers. He said: "We have to move away over the next number of years from being obsessed with having the lowest fares in the market."RyanairAirline industryIrelandEurozone crisisEuropeDan Milmoguardian.co.uk © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds

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