Ryanair profits hit record high but airline warns pilot pay rises will hurt balance sheet this year

Boss Michael O’Leary said company continues to plan for impact of hard Brexit

The budget airline is raising pilots' wages (Reuters)

Budget airline Ryanair has reported record annual profits but warned higher costs due to increased pay for pilots would hit the balance sheet over the course of this year.

The group grew profit by 10 per cent in the year to 13 March, up to €1.45bn (£1.27bn) from €1.32bn the previous year, while revenue rose 8 per cent to €7.15bn from €6.65bn.

The airline saw the number of passengers – referred to as “guests” in the results statement – increase by 9 per cent to hit 130 million, compared to 120 million in the previous period.

The company said its average fare fell by 3 per cent last year to €39.40.

Ryanair chief executive Michael O’Leary said the firm was pleased with its profit growth and unchanged margin of 20 per cent. He said this was achieved “despite a 3 per cent cut in air fares, during a year of overcapacity in Europe, leading to a weaker fare environment, rising fuel prices, and the recovery from our September 2017 rostering management failure”. Last autumn, Ryanair was forced to cancel around 20,000 flights due to crew shortages, caused by a combination of allocating a calendar month of annual leave to more than half its pilots between September and December; “mismanaged blockages” in the training of 200 new recruits; and a failure to address the transition to a different “flight-time limitations” cycle.

The issue triggered pay rises for pilots amid growing discontent about the airline’s treatment of flight crew.

Ryanair said pay increases would cause costs excluding fuel to rise 6 per cent, while higher oil prices will add €400m to the fuel bill, meaning total costs will go up 9 per cent. This will lead to a drop in profits of up £1.18bn, the company estimates. This “heavily dependent” on maintaining fares and no negative Brexit developments during the year, among other things. Mr O’Leary said the group’s outlook for the current financial year was “on the pessimistic side of cautious”, and the company remains concerned about the impact of a hard Brexit.

“While there is a general belief that an 18-month transition agreement from March 2019 to December 2020 will be implemented and further extended, it is in the best interest of our shareholders that we continue to plan for a hard Brexit in March 2019,” Mr O’Leary said.

“In these circumstances, it is likely that our UK shareholders will be treated as non-EU and this could potentially affect Ryanair’s licencing and flight rights. Accordingly, in line with our Articles, we intend to restrict the voting rights of all non-EU shareholders in the event of a hard Brexit, so that we can ensure that Ryanair is majority-owned and controlled by EU shareholders at all times to comply with our licences.”