UPDATE 1-Aer Lingus says Ryanair discounting to hit EU airlines

Reuters

2013/09/13 | 481 words | AVIATION WORLD NEWS | INDUSTRY / TECHNOLOGY

* Aer Lingus cuts profit forecast by 13 percent

* Ryanair has "opened the taps" on pricing, CEO says

* Says Ryanair selling some tickets 20 euros below cost

(Recasts with Aer Lingus CEO comments on Ryanair pricing, adds
analyst comment, updates shares)

By Conor Humphries

DUBLIN, Sept 13 (Reuters) - The profitability of European
airlines will be squeezed in coming months due to heavy
discounting by Ryanair, its Irish rival Aer Lingus
said on Friday as it cut its profit forecast for the
year.

Ryanair, which flies more international scheduled passengers
than any other European airline, said last week it planned to
introduce "aggressive" pricing to maintain volumes amid signs of
weak demand in the autumn.

The threat of a price war comes as airlines struggle with
high fuel costs and weak consumer confidence, although a lack of
growth in capacity in recent years has kept ticket prices
relatively stable.

"Ryanair has opened the taps," Aer Lingus Chief Executive
Christoph Mueller said, adding price cuts were being felt across
Europe and with "significant intensity" in markets such as Italy
and Poland.

"We are less affected than other carriers in Europe, but
clearly the offering currently on the market on some of the
Ryanair routes is below their own cost level," Mueller said. He
said he believed Ryanair was selling tickets at up to 20 euros
per passenger below cost on some routes.

A Ryanair spokesman said it "would not comment on the
excuses of high-cost competitors."



PRICING PRESSURES

Ryanair issued its own profit warning last week and with Aer
Lingus following suit, it indicates pricing pressure will spread
across the sector, said Investec analyst Gerard Moore.

Aer Lingus cut its profit forecast for the year by 13
percent, saying its profit for the full year would be around 60
million euros, down from a forecast of 69 million euros ($91.8
million) it made at the end of July.

"This shows Ryanair's profit warning wasn't just a company
specific issue and there's an impact on the broader market,"
said Moore. "It's worrying for the whole sector."

In July, Aer Lingus reported weak bookings in July and
August due to unusually warm weather in Ireland, but said it
hoped to make up for that shortfall in the remaining months of
the year.

In Friday's statement the carrier said despite more
aggressive pricing it did not now expect to recover the lost
volumes.

It said it would cut short-haul capacity in the final three
months of the year by 3 percent, but that long-haul bookings for
the remainder of 2013 were ahead of last year.

Aer Lingus shares were down 7.6 percent at 1.46 euros by
1300 GMT compared with a fall of 0.6 percent on the Thomson
Reuters European Airlines Index

Aer Lingus also said it had seen significant weakness in the
number of UK travellers to Ireland and expected currency
fluctuations to cost it around 10 million euros over the course
of the year.
($1 = 0.7514 euros)

(Editing by Jane Merriman and David Holmes)


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