Ryanair said today that weaker fares combined with higher staff and fuel costs caused profit to fall by 20% compared with last year in the three months to the end of June, the first quarter of its financial year.
But the profit of €319m for the quarter was in line with Ryanair's earlier guidance and slightly ahead of a forecast of €305m, according to a company poll of analysts.
Shares in the company fell nearly 7% in Dublin trade after it warned that average fares would be lower than expected during its key summer period due to high competition, unusually hot weather in Europe and uncertainty caused by a series of strikes.
"While Q1 fares were marginally stronger than previously expected, the recent weaker fare environment and the expected impact of crew strikes on forward pricing mean that Q2 fares will only rise by approx 1%," chief executive Michael O'Leary said in a statement.
The weaker environment was "due to the World Cup, the Northern European heat wave and customer uncertainty about pilot strikes," Michael O'Leary said.
Ryanair released the results ahead of its worst-ever week for strike action, with over 300 of its daily 2,400 flights cancelled on Wednesday and Thursday due to action by cabin crew in Spain, Portugal, Italy and Belgium.
Ryanair, which flies in 37 countries and carried 130 million passengers last year, averted widespread strikes before Christmas by deciding to recognise trade unions for the first time in its 32-year history.
But it has since struggled to reach agreement on terms with several of them.
"While we continue to actively engage with pilot and cabin crew unions across Europe, we expect further strikes over the peak summer period," Michael O'Leary said.
He said the airline would consider moving planes from some markets, including Ireland, if disruptions continue and that this could lead to job losses.
"We cannot allow our customers flights to be unnecessarily disrupted by a tiny minority of pilots," he said.
Ryanair reaffirmed its forecast for profit for the year to be between €1.25-1.35 billion, down from a record €1.45 billion in the year to March 31.
In May the airline forecast a 5% decline in average fares in the first quarter and a rise of 4% in the second quarter.
Today it said that fares fell 4% in the first quarter but would rise by only 1% in the second.
The results come after EasyJet, Europe's second-biggest low-cost airline, raised its profit guidance, forecasting earnings could soar by as much as 45% this year.
Meanwhile, fast-growing budget airline Norwegian Air Shuttle earlier in July also beat expectations with a second-quarter net profit.
Ryanair's shares closed on Friday at €15.55, down almost 20% from an all-time high of €19.38 in August last year before a rostering problem forced it to cancel 20,000 flights.
The shares are 6% above its 12-month low of €14.61 after it shocked investors by agreeing to recognise unions.
Merrion's senior equity analyst Darren McKinley said that Ryanair is facing multiple headwinds at present with little sign of these easing in the coming quarters.
Mr McKinley said that management are prepared to sacrifice short term profitability to face down demands by unions.
"We would not rule out management having to review FY 2019 profit guidance given than profits declined by 20% in Q1, yet expected to only fall by 12% for FY 2019 to between €1.25-1.35 billion," he added.
Ryanair raises Laudamotion loss estimate to €150m
Ryanair also said today that it expected Austrian holiday airline Laudamotion, which it agreed to buy earlier this year, to post annual losses of €150m, up from an earlier estimate of €100m.
Ryanair said it plans to increase its stake in Laudamotion to 75% from 25% in the coming weeks after securing regulatory approval.
It blamed the higher loss on factors including lower-than-expected summer fares due to the late release of Laudamotion schedules this summer.
"Next year it will get its schedules on sale much earlier, so it won't have the issues with last minute discounting," the airline's chief financial officer Neil Sorohan told Reuters.
"We will help it out with its fuel hedging and I would expect it to break even towards the back end of year three."
Neil Sorohan said Ryanair would consider other acquisition opportunities, but said Ryanair's key growth would be through organic growth.
Laudamotion also faces "substantial cost headwinds" in fuel as it does not hedge, Ryanair added.
Laudamotion also suffered "considerable damage" from a dispute with Lufthansa over leased aircraft, it said.
