Ryanair's FY2019 results: a warning to Europe's airlines

Ryanair Group's results for FY2019 (year to Mar-2019), although expected, sound a warning to the European airline industry.

Europe's highest margin airline group reported its lowest profits in five years and suffered a 10ppt drop in its consolidated operating margin as average fares fell by 6%. Moreover, Ryanair expects further declines in ticket prices and another year of falling margins in FY2020.

However, Ryanair is well placed to weather storms of this nature. In spite of the precipitous drop in its profits last year, it still had the highest operating margin of Europe's big five airline groups, ahead of IAG, easyJet, Lufthansa Group and Air France-KLM. Moreover, strong growth in its ancillary revenues helps to offset weakness in fares.

More ominously for others, falling fares are a deliberate ploy by the ultra LCC to maintain its industry-leading load factors, taking traffic from higher cost airlines less able to cope with price competition.

As the European airline industry moves through a downturn in the profit cycle, this approach should ensure that Ryanair is a beneficiary of the resultant consolidation. IAG, easyJet, Lufthansa Group and Air France-KLM are also likely to benefit, but Ryanair's superior profitability gives it more headroom to navigate the increasing downward pressure on margins.