Overcapacity is hitting profits but airlines won’t stop adding more

RyanAir reported its Q1FY2020 (their financial year starts in April 2019, following UK/Irish tradition), and the figures weren’t exactly spectacular.

They added capacity and grew their passenger numbers 11% but revenue was down by 21%.

So for every €100 of ticket at the start of the year they’re only getting €79 now.

If you keep pushing up capacity that’s what happens. And they’re not the only ones. New deliveries mean aircraft have to work and that injects seat supply into the market that has to be sold. The more their is chasing the same customers, the lower prices have to go to attract them.

Lower revenue, coupled to higher staff costs as Unions start to protect pilots and staff from what amounts to virtual exploitation, are squeezing profits from inside the business while over capacity cuts income and profit from outside.

This whole saga is repeating across Europe. In some respects it’s been held back by the lack of MAX deliveries, but come 2020 when they start to arrive pressure on the smaller airlines is going to be unbearable. One or more of them is going to go down.

The FOMO factor is what drives them. Nobody wants to be next and by being in the game when one of the others does give up, they’ll be there to pick up the pieces.

The writing is clearly on the wall. When RyanAir posts results like this there are others in far more worrying states of distress and they’re doing all they can to hide it.