Ryanair predicts a 'grim' winter after summer profits fall 7%

  • The airline has struggled with weaker fares, higher oil prices and several strikes by crew and air traffic control members.
  • He predicted that amid such an environment, many airlines would struggle to operate. "You will see more failures this winter as we enter what is probably a four-five year downturn in the industry."

Ryanair reported lower-than-expected profits in the second quarter of its fiscal year on Monday, as the airline struggles with weaker fares, higher oil prices and several strikes.

It reported a net profit of 841.5 million euros ($968.61 million) for the second quarter, which was slightly below analyst expectations of 855 million euros, according to data firm Refinitiv. For the first half of the year, Ryanair reported a 7 percent drop in net profit to 1.2 billion euros.

Here are the key highlights:

  • Net profit: 841.5 million euros, versus 309.2 million euros in the first quarter.
  • Total operating expenses: 1.825 billion euros, versus 1.708 billion in the first quarter.

Speaking to CNBC Monday, Ryanair's CEO painted a gloomy picture for the rest of the year.

"The winter looks grim. We have a combination of rising oil prices; although Ryanair is very well hedged while competitors aren't; fares are falling, there's excess capacity in Europe ... We see a winter characterized by declining air fares," Michael O'Leary, CEO or Ryanair told CNBC's "Squawk Box Europe" Monday.

He predicted that amid such an environment, many airlines would struggle to operate. "You will see more failures this winter as we enter what is probably a four-five year downturn in the industry."

One of the big issues for Ryanair this year has been strikes and flight cancellations. "There's been a lot of misinformation about this. Firstly most of the strikes and the cancellations this year and across Europe have been air traffic control, mainly French and German air traffic control and the U.K. were understaffed. We, in the entire year so far, have had eight strikes," O'Leary told CNBC.

"We have made very significant progress, we have done deals now in Ireland, in the U.K., Italy, we signed with Portuguese pilots last week ... But there's been very little disruption within Ryanair this year as rising from ... our own people," he said.

The airline said that the different air traffic control strikes and staff shortages meant that 2018 will the "worst year on record" for European air traffic control disruptions. This has affected punctuality and schedules.

Ryanair has said that it has increased its investment to ensure on-time departures. One of the initiatives it has taken is to change its handling provider at Stansted airport, near London, to avoid some of the delays seen over the summer due to short-staffing.

Brexit

Ryanair's management has been particularly worried about Brexit and what this decision might mean for its flights to and from the U.K. The company said in the last quarter that the danger of a no-deal is "being underestimated".

This time, Ryanair noted that the risk of a no-deal is rising. The U.K. is set to leave the EU in March of next year and until now, both sides have not reached an agreement over how that departure should take place.

The airline hopes that the U.K. and the EU will allow for a transition period of 21 months or more. "We remain concerned that the time to complete such an agreement is shortening," the company said in a statement.

Ryanair shares were up by 3 percent shortly after markets opened in Europe. The carrier has forecast the end of labor issues by Christmas.