What's going on?
On Friday, Irish budget airline Ryanair saw its shares fall 2% after it said profit would be lower than expected for the second time in four months. Brace for impact.
What does this mean?
Europe’s largest low-cost carrier now expects its annual profit to be over $100 million lower than its previous estimate, after locking horns and engaging in a winter price war with its competitors. It could have been worse: the lower price of fares was partially offset by an increase in the number of passengers flying with Ryanair. Around 142 million people are estimated to have traveled with Ryanair over the past year – 9% more than the year before.
Why should I care?
For markets: A rocky landing.
Stateside, American Airlines and Delta Air Lines both warned this month that their profits would be lower than expected. Delta blamed the US government shutdown stifling demand for travel, while American cited weaker domestic fare prices – and both companies’ share prices took a nosedive. Much of the turbulence on both sides of the Atlantic can be blamed on a race to the bottom for consumers’ wallets and an oversupply of seats on short-haul flights. Airlines make more money the fuller a flight is. Ongoing price wars, therefore, may well push some airlines into bankruptcy.
For you personally: Time to get flying – if you can.
If airlines are already discounting flights, perhaps it’s time to grab yourself a bargain. After a record hot summer in Europe where many stay-cationed, itchy feet might lead people to use cheaper fares to get some winter sun. This extra spending could give a much-needed boost to consumer confidence, which is already depressed across Europe. Although, with confidence low, consumers might not be tempted enough by deals.