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Laudamotion facing 'difficult' first year: Ryanair

Ryanair is expecting its Laudamotion affiliate to lose around €150 million ($176 million) in its first year, but is forecasting break-even by the third year of operations.

The Irish budget carrier has been cleared to increase its 24.9% shareholding in Laudamotion to 75% but says the affiliate is facing a “very difficult” first year, the result of “substantial” costs – including high fuel prices.

Ryanair says the late release of Laudamotion schedules and lower-than-expected fares are contributing to the situation, and it also claims interference from Lufthansa.

Laudamotion’s financial performance has not been incorporated into Ryanair’s first-quarter results to 30 June, and Ryanair is leaving its full-year guidance unchanged.

But the effects of higher fuel expenditure, lower fares and crew strikes led to a 20% fall in first-quarter net profit to €319 million.

Passenger numbers were up 7% and revenues by 9%, despite a 4% decline in average fares. But higher fuel and staff costs offset strong ancillary revenue growth in the quarter.

The carrier says first-quarter fares were “marginally” stronger than forecast, but the rise in second-quarter fares will be lower – just 1% compared with the predicted 4%.

While Ryanair has been taking steps to recognise unions, it says it has experienced “unnecessary” strikes, and is expecting further industrial action over the peak summer period.

“We are not prepared to conceded to unreasonable demands that will compromise either our low fares or our highly-efficient model,” it says.

“If these unnecessary strikes continue to damage customer confidence and forward prices [and] yields in certain country markets, then we will have to review our winter schedule.”

Ryanair warns that such measures could lead to fleet reductions and job losses. “We cannot allow our customers’ flights to be unnecessarily disrupted by a tiny minority of pilots,” it says.

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