Ryanair to 'Pivot' to Mainland Europe From U.K. After Brexit Vote
Irish airline Ryanair (RYAAY) - Get Report on Monday warned it plans to "pivot" its growth away from U.K. airports to focus more on expanding at other European Union airports over the next two years, as a result of the June vote for Britain to leave the EU.
The airline said it also plans to cut capacity and frequency on many of its routes at its London hub airport, Stansted, this winter, although no routes will close. However, in the longer term, there may be opportunities for the airline if some of its U.K.-registered competitors are no longer permitted to operate internal EU routes or have to divest majority ownership of EU-registered airlines.
The warning came as Dublin-based Ryanair issued first-quarter results showing profit after tax rose to €256 million ($280.7 million) in the three months to June 30, a 4% increase compared with the same period last year. It said traffic grew 11% to 31.2 million customers, revenue rose 2% to €1.69 billion and basic earnings per share were up 12% to a fraction over €0.20 per share.
Calling the increase in profit "modest," CEO Michael O'Leary said the growth was in line with previous guidance. "The absence of Easter in Q1 and on-going market volatility arising from terrorist events, as well as repeated [air traffic control] strikes (particularly in France) weakened fares [...] and caused almost 1,000 flight cancellations," he said.
However, the company is now enjoying a growing cost advantage over its competitive as unit costs fell 9% by €42 million in the first quarter, for a range of reasons of which the fall in the value of the U.K. pound was only one.
Returning to the Brexit question, O'Leary said the vote was "both a surprise and disappointment," for what is on some measures the U.K.'s largest airline, despite its Irish base and low-fare model. He said it was impossible to predict what effect Brexit will have on the airline's business until some clarity emerges over the next two years about the U.K.'s long-term political and economic relationships with the EU. However, Ryanair has contingency plans in place for all eventualities.
"In the near term we expect that Brexit uncertainty will lead to weaker sterling, slower growth in the UK and EU economies and downward pressure on fares until the end of 2017 at least," O'Leary said. "Over the longer term, if the UK is unable to negotiate access to the single market/open skies it may have implications for our 3 UK domestic routes and UK nationals on our share register but these risks are not material and will be manageable."
Ryanair's stock was up 5.5% by mid-morning in London at €11.50.