Ryanair profits eat dust after volcano cancellations

The airline blames the government for 24% drop in profits. We love a good conspiracy theory...

Last Updated: 19 Sep 2012

Ryanair, the airline everyone loves to hate, has announced its second-quarter profits are down by 24% to €93.7m (£80m) after volcanic ash clouds threw it off course. The airline, which is Europe’s biggest low-cost carrier, said the Icelandic volcano forced it to cancel almost 10,000 flights over the 18 days flights were banned over European airspace, costing it around €50m. Schadenfreude, us?

Never one to avoid pointing the finger (even when there’s a fairly reliable body of scientific evidence to the contrary), Ryanair has placed the blame for its losses not on Mother Nature but on, er, Government conspiracy, accusing authorities of making up the ash cloud. ‘One and a half million passengers… were disrupted because of non-existent volcanic ash clouds,’ said the airline’s chief financial officer, Howard Miller. ‘It was a regulatory disaster’. Interesting theory...

Among the airline’s other complaints were a ‘disastrous’ €10 tourist tax as part of austerity measures in Ireland, as well as regulations forcing airlines to compensate passengers, which chief exec Michael O’Leary called ‘unfair and disproportionate’ when you compare it to ‘rival’ modes of transport like ferries and buses. Other forms of transport have their liability limited to the price of the ticket (rather than paying additional accommodation costs for stranded passengers as well). When you think about it, he might have a bit of a point.

Government vendettas aside, though, Ryanair is still on course to see its profits rise by 10% to 15% to somewhere between €350 and €375m by the end of the year – although that does exclude the losses from the ash cloud. It’s also taking measures, including reducing frequency and only flying to destinations where there is strong demand, to ensure it meets expectations that yields will rise by 4% over the course of the year. Presumably stand-up seats and charging people to use the toilets are the key strategies in this cunning plan.

There was more indication that aviation is undergoing something of a recovery at the first day of the Farnborough International Airshow yesterday. As of yesterday afternoon, orders for Boeing and Airbus planes totalled $23bn (£15bn), with 122 orders for Airbus models (just seven away from its target of 130 for the week), and 170 for Boeing – although the majority were for both manufacturers’ smaller short-haul models. Exeter-based Flybe has also announced an order worth £850m for 35 88-seater Embraer 175 jets – not bad for a minnow whose business is mostly domestic.

Whether you like Ryanair’s tactics or not, its success in the face of adversity (let’s not forget rival easyJet had to cut its profit expectations by £75m during the ash cloud debacle) show that it’s resilient. In many ways, it’s the cockroach of the airline industry: unglamorous, but with a knack for survival – even in the face of volcanic eruptions. Come the nuclear holocaust, we know who we’ll be flying with…

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