Ryanair reported its first ever loss yesterday, saying it was dragged into the red by a massive writedown on its stake in rival Aer Lingus.
Despite carrying about 15 per cent more travellers in the year to 31 March, the Irish no-frills airline slumped to a €181m (£156m) pre-tax loss from a pre-tax profit of €439m (£378m) a year ago. The biggest culprit was a €223m (£192m) charge on Ryanair's 29.8 per cent investment in its beleaguered competitor. But €51.6m (£44.4m) of accelerated depreciation on aircraft disposals, and profit margins eroded by big discounts to woo customers, also played a part.
Ryanair joins a growing list of loss-making carriers. More than 30 airlines have gone bust since the start of 2008, crippled first by sky-high fuel prices, then by collapsing passenger numbers. Smaller players are not the only casualties. Last month saw British Airways report a pre-tax loss of £401m for 2008, which it blamed on the dearth of premium-class travellers. And Sir Richard Branson, the chief executive of Virgin Atlantic, yesterday predicted the demise of a major US carrier this year.
Ryanair's writedown on Aer Lingus adds injury to insult for its chief executive Michael O'Leary. Last year, the Irish government, which controls 40 per cent of Aer Lingus, rejected his second takeover attempt. Ryanair said that without the Aer Lingus losses, its pre-tax profits came in at €93.6m, a far cry from last year's figure. Revenues were up by 8 per cent at €2.9bn and 58.5 million passengers flew with the airline, an increase of 8 million, but heavy discounting ate into its profits.
Mr O'Leary has grand visions for this year. Ryanair already claims to have Europe's largest customer base and aims to add another 15 per cent to take that total to 67 million by cutting fares by another 20 per cent. The company already has a strong cash position – €2.3bn and rising – thanks to its more profitable short-haul business model compared with that of overstretched intercontinental competitors. The introduction of online check-in only this autumn will also help to cut costs. On the basis of current fuel price and yield expectations, Ryanair expects its after-tax profits to double to between €200m and €300m over the next year.
Mr O'Leary said: "At a time when all of our competitors are suffering increasing costs, Ryanair uniquely is reducing unit costs. In this recessionary environment, we intend to continue to offer European consumers more competition, more choice and even better value, just like Aldi, Lidl, Ikea and McDonald's are doing in their respective industries."
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