Europe's Largest Low-Cost Airline Predicts Bleak 2019

Ryanair, the largest low-cost carrier in Europe, warned investors Monday that it could see its first drop in profits in five years.

The Dublin-based carrier said its profits through March 2019 could drop by as much as 14% due to factors like rising oil prices and ongoing pilot strikes. Negotiating with the pilot unions in 2017 was a significant financial drawback for Ryanair because it was the first time the carrier settled with a union in company history. The budget airline had to increase pilot and cabin crew pay to keep them on staff.

The current shortage of pilots in the European Union will also complicate matters for Ryanair's bottom line, the airline predicts.

Fellow European carrier Air France has struggled for most of 2018 due to its own pilots (and other employees) striking over pay disputes. Those strikes have called the airline's future into question, with France's finance minister saying if the dire situation isn't turned around, the airline might "disappear."

Although Ryanair's 2019 outlook is "on the pessimistic side of cautious," the carrier's CEO Michael O'Leary expects his European budget competitors to be even worse off — especially with the rising cost of oil. O'Leary predicted Monday that many of those rivals would even declare bankruptcy this year.

"Clearly $80 a barrel oil is going to bring casualties in Europe this winter," O'Leary told CNBC on Monday. "Oil is going to be a driver but I think it will be a driver of change to the competition landscape in Europe. Some of those airlines who couldn't make money when oil was at $40 a barrel last year, I don't think will survive this winter if oil remains up at these elevated levels," he said.

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The bleak predictions for the bottom line in 2019 come amid record-breaking profits for Ryanair in 2018. The low-cost carrier reported 1.45 billion euro ($1.7 billion) in profits for the financial year that ended March 31 — a 10% increase in profits year over year, which was higher than expected.

H/T: CNBC