Budget airline price war predicted as Ryanair says it will slash fares
Ryanair has sparked what could develop into a full scale budget airline price war, leading to lower summer air fares for millions, experts have said.
The Dublin-based carrier said it plans to slash fares by an average of 7% this year as the industry struggles with overcapacity and weakened demand caused by the terror attacks in Brussels and Paris.
Analysts are now forecasting that other carriers could follow suit.
Robin Byde at Cantor Fitzgerald said: "Ryanair is a major player in many of the markets and airports it flies to. If it cuts prices, other airlines will have to respond to that."
Earlier this month, rival easyJet also said it will look at price cuts, saying it "will be able to offer its customers even better value fares this summer".
But Ryanair chief executive Michael O'Leary vowed on Monday that the Irish airline will emerge victorious in any price war.
He said: "If other airlines want to compete with us on price, then we will lower our prices again. If there is a fare war in Europe, then Ryanair will be the winner."
Lower fuel costs have given airlines the flexibility to reduce fares over the past year, with global oil prices falling some 70% since the summer of 2014.
Ryanair said it expects its fuel bill will fall by 200 million euro (£154 million) this year, and will pass this saving on to passengers.
Russ Mould, investment director at stockbroker AJ Bell, said: "Ryanair has thrown down the gauntlet to its budget airline rivals promising further cuts in air fares as it bids to maintain its market share."
The impact of the recent EgyptAir plane crash may further weaken the appetite for international travel over the coming months, providing more incentive for carriers to cut fares.
Numis Securities analyst Wyn Ellis added: "There is a feeling in the market that prices will ease over the summer. This is because of the combination of growing capacity, slowing demand and lower oil prices that cut back on airline costs."