Millions of travellers set to benefit from budget airline price wars, as Ryanair fares fall to an average of €33 per person
A competitive price war amongst budget airlines will benefit millions of British passengers
MILLIONS of British travellers are set to benefit from a price war amongst Europe's budget airlines, with Ryanair announcing a drop in fares.
Today, the budget carrier reported a 17 per cent drop in ticket prices to an average of €33 (£28) per person in the three months to the end of December, and said it expects prices to fall further into 2018.
Announcing its earnings this morning, the Irish airline said: "Our prices are falling faster than we initially planned, but this is good news for customers."
It blamed downward price pressure on Brexit uncertainty, a weaker pound, and the drop in demand for destinations like Turkey, Egypt and North Africa, all of which have experienced terrorist attacks in recent years.
Airlines are now pulling back from those regions to focus on the Western Mediterranean, Spain and Portugal, where competition is getting fierce.
Cheap fuel prices are enabling further price cuts.
Following Ryanair's falling prices, analysts are now predicting other carriers could follow suit and slash prices.
Robin Byde, a transport analyst at Cantor Fitzgerald, said: "There is too much capacity in the European short haul market and both Ryanair and easyJet have ambitious growth plans.
"Both have signalled weaker yields, and are, in part, driving this discounting."
Numis Securities analyst Wyn Ellis said he expects fares will continue to drop throughout the year and could reach their lowest levels around mid-2018, even while general inflation is expected to rise.
"Generally at the moment I would say there is little signs that airlines are cutting back, and until they do, I think the market is going to be under pressure."
Martin Lane, managing editor of money.co.uk, said: “I feel a bit sorry for Ryanair – they’ve responded to what travellers want by keeping air fares at rock bottom prices, but the impending Brexit means their profits are bound to suffer.
"Their hands are tied – with such low pricing they have little wiggle room and customers expect cheap flights from them. If they up their prices I suspect customers will just pay a little extra to get a more luxurious service.
“Worrying times for Ryanair, but also for travellers who don’t mind flying basic for cheap. Could Brexit be the end of dirt cheap flights?”
Ryanair's profit after tax dropped eight percent in its third quarter of 2016, following the pound's sharp decline post-Brexit.
Net profits fell to €95 million (£81 million) in the three months to the end of 2016 compared with the equivalent period a year earlier, the Irish no-frills carrier said in an earnings statement.
"We expect sterling to remain volatile for some time and we may see a slowdown in economic growth in both the UK and Europe as we move closer to Brexit," Ryanair said.
"While there may be opportunities to expand at certain UK airports... we expect to grow at a slower pace than previously planned in the UK and will continue to switch capacity into other key markets around Europe," it added.
Britain accounts for around one-quarter of Ryanair's revenues and converting sterling ticket sales back into euros has hit the airline's bottom line, analysts said.
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