Ryanair shares went into a tailspin yesterday after the low-cost airline reported disappointing passenger figures and legislators in Brussels approved plans to force all carriers to pay heavy compensation for delayed and cancelled flights.
The Dublin-based airline said that it only filled 79 per cent of the available seats on its aircraft in June compared with 88 per cent the same month the previous year. Actual passenger numbers were up, however, by 47 per cent to 1.83 million, bolstered by Ryanair's takeover of the rival no-frills carrier Buzz.
Analysts said that with Ryanair also cutting fares at the same time as suffering reduced load factors, profit margins were likely to be under pressure. Ryanair shares closed 31.5p or 7 per cent lower at 400p.
The Ryanair share price has suffered from considerable turbulence since Michael O'Leary, the airline's chief executive, unveiled plans last month to pursue passenger growth at the expense of profit margins. Ryanair began by offering one million seats at prices of £19.99 to £29.99 - the first time it has launched a cut-price fares campaign during the summer peak period.
Easyjet also took a bit of a buffetting after the European Parliament voted for measures to impose the same level of compensation payments on low-cost carriers as full service airlines. EasyJet complained that the amount of compensation for flight delays should be proportionate to the cost of the ticket but MEP's rejected this argument. EasyJet shares eased 2p to 230p.
British Airways fared better, however, after reporting an increase in both passenger numbers and the proportion of seats filled in June. BA shares rose 6 per cent to close at 163p.
Passenger traffic grew by 5.8 per cent while overall load factors grew by 2 percentage points to 76.8 per cent. BA said that traffic was slowly improving from the low levels seen early in the year, largely as a result of last-minute bookings. Nevertheless, the airline cautioned that yields continued to be weak while the outlook remained "fragile".
Business class bookings also remain weak. Premium traffic fell 2.5 per cent in June, offset by a 7.3 per cent increase in economy passenger traffic. Passenger numbers were up strongly on BA's European, American, African and Middle East routes but they fell 22 per cent on flights to the Asia Pacific region which are still being hit hard by the Sars virus.
Meanwhile, Europe's fourth-biggest airline, KLM, said that passenger load factors were down marginally in June to 79.7 per cent although there was some evidence of recovery on Far Eastern routes.
The new chairman of Lufthansa, Wolfgang Mayrhuber, said on a visit to London that it would be tough for the German airline to avoid making a loss this year. In the first quarter of the year Lufthansa booked an operating loss of €415m. Mr Mayrhuber said that he did not expect to have to make job cuts among the group's 94,000 staff.