By BLOOMBERG

LONDON • Labour strife is starting to weigh on Ryanair Holdings plc, and the conflict looks set to deepen.

The discount airline posted a 20% drop in first-quarter (1Q) profit yesterday, and warned that walkouts by trade unions, along with regional air traffic-control strikes, are making customers wary of booking trips.

While the carrier was able to accommodate passengers whose flights were cancelled during recent disruptions by Irish pilots, “the real impact is going to be on uncertainty in relation to the forward booking curve”, CFO Neil Sorahan said by phone. The executive also said he’s “a little bit more pessimistic on fares” than in May after they dropped in the latest reporting period.

Ryanair shares fell as much as 6.3%, the most in just over seven months, dragging down other European airline stocks.

Deutsche Lufthansa AG and EasyJet plc fell as much as 3%, and IAG SA was down 2%.

The Irish airline has cancelled 16 flights last Tuesday ahead of looming strikes by pilots in its home market, and 600 flights last Wednesday and Thursday as Spanish, Portuguese and Belgian flight attendants walk out. Germany’s Vereinigung Cockpit pilot union is also holding a vote on possible strike action, with the outcome due later this month.

This summer’s disruptions mark the first major industrial action the budget carrier has seen, after it agreed to accept unionisation in the face of a staffing crunch last year.

Kept Guidance
The carrier kept its full-year profit outlook, but said the guidance is “heavily dependent” on fares this quarter, strikes by crew and air traffic- controllers and other wild cards such as Brexit.

Fares fell 4% during the period ended June 30, and the pricing environment remains weak, Ryanair said in a statement.

Hesitation on the part of customers to book is feeding into a drop in prices, just as fuel costs rise and the Irish carrier shells out for 20% pay increases already granted to pilots.

The airline said it expects further strikes over the peak summer period “as we are not prepared to concede to unreasonable demands that will compromise either our low fares or our highly efficient model”. It may review its winter schedule — shrinking fleets at bases where there’s disruption — if strikes continue to hit customer confidence.

Shifting Fleet
“If there’s other bases where we can make more money and we can operate more efficiently then we’ll look at the allocation” of planes, Sorahan said in an interview yesterday. “We’ve got mobile assets and these assets can be moved around quite freely.” No decisions about shifting its fleet have yet been taken, he said.

Profit after taxes fell to €319 million (RM1.6 billion) in the three months ended June 30.

Ryanair left unchanged guidance set out in May that net income for the year ending March 2019 will decline for the first time since 2014, to a range of €1.25 billion to €1.35 billion.

It said fares will rise about 1% in the 2Q, down from the previous target of 4%.

The airline is making “good progress” in its talks with unions, Sorahan told Bloomberg TV yesterday, and has coped with strikes “very very well”.

First-quarter revenue rose 9% to €2.08 billion. Analysts had expected revenue of €2.04 billion, according to eight estimates compiled by Bloomberg.

Ancillary revenue, including from passengers paying extra for priority boarding, rose 25%.