Ryanair says fares to fall 7% amid price war

BBC – Ryanair says it expects its average fare to fall by 7% this year as it cuts prices to boost its market share amid intensifying competition.

“If there is a fare war in Europe, then Ryanair will be the winner,” Ryanair chief executive Michael O’Leary said.

Analysts said rival airlines were likely to follow suit.

The cuts came as the budget airline reported a 43% rise in net profit to €1.2bn for the full year to the end of March, just short of analyst forecasts.

Mr O’Leary vowed to take market share from rival airlines, saying: “If other airlines want to compete with us on price, then we will lower our prices again.”

‘Throwing down the gauntlet’

The sharp drop in the price of oil, which has fallen 70% since June 2014, has made it easier for airlines to cut flight costs and analysts said rival airlines would be forced to cut their fares in response.

“Ryanair is a major player in many of the markets and airports it flies to. If it cuts prices, other airlines will have to respond to that,” said Robin Byde at Cantor Fitzgerald.

Ryanair uses what it calls a “load factor active/yield passive” model, which means that it will cut fares as much as is necessary to keep its aircraft full.

Rivals including Easyjet, British Airways owner IAG, Lufthansa and Air France-KLM have warned recently about the impact on tourism from the terrorist attacks in Paris and Brussels.

Last week Thomas Cook said summer bookings were down 5% compared with last year, due in part to terrorism fears.

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