Easyjet, Thomas Cook and Ryanair — Brexit's effect on tourism's big names

Profits have plunged at Ryanair and Easyjet, while 43% of troubled tour operator Thomas Cook's summer holidays remain unsold. The travel sector can only lick its wounds and wait out the Brexit uncertainty.

The dark cloud of Brexit still looms large over Europe's tourism industry, despite the delay to Britain's withdrawal from the European Union.

Fewer Europeans are visiting the UK. According to tourism agency Visit Britain, overseas arrivals were down 5.3% last year, while a similar pattern has been observed in the first few months of 2019.

Tour operator Thomas Cook, meanwhile, reported a 27% rise in the number of Britons choosing longer-haul holiday destinations instead of their usual European retreats.

In the month's leading up to Britain's planned EU departure date of March 29, the tourism sector warned that the threat of customs delays, visas and even potential EU airspace restrictions had prompted a considerable drop in overseas bookings.

These concerns have been heightened over the past few days by the changing fortunes of some of Europe's largest travel firms.

Read more: Lufthansa looks to snap up Thomas Cook's Condor airline

Airlines drops fares

On Monday, Ryanair became the latest to cite consumers' unease over Brexit for its drop in profits.

The Irish budget airline, whose biggest airport base is London Stansted, announced its 2018 full year profits fell 29% to €1.02 billion ($1.14 billion).

Although its own passenger numbers grew last year, it was forced to lower fares by 6% amid rising costs and a pound struggling against the euro — the currency in which it discloses its financial results.

Now live
01:12 mins.
Business | 09.08.2018

The flip side of cheap flights

Chief Executive Michael O'Leary admitted that the company had noticed a "later booking pattern," and that the firm was "having to stimulate bookings with lower airfares."

Related Subjects

The company warned that in 2019, its fares would continue to fall in the UK and Germany and that it couldn't predict the second half of its financial year, which begins as the new October deadline for Britain to leave the EU expires.

As Britain accounts for around a quarter of Ryanair's revenues, a disorderly EU departure could leave Europe's No. 1 low-cost carrier particularly vulnerable.

"There's no doubt Brexit is still having a big impact on passenger flows for several airlines," Johanna Bonhill-Smith, Associate Research Analyst at the UK-based Global Data, told DW.

Last week, Ryanair's fiercest competitor, Easyjet, said its net losses more than quadrupled in its first half to 218 million pounds (€250 million, $280 million). CEO Johan Lundgren blamed "macroeconomic uncertainty and many unanswered questions surrounding Brexit."

Read more: Might the poolside towel war be over?

'Tougher trading' environment

It's a "different environment this year than what we saw last year," he said in an interview with British media, "It's definitely a tougher trading environment, which has an effect on the pricing."

Easyjet has also lowered fares this year, despite rising jet fuel costs, and warned that advanced bookings for the third quarter were already down 4% on last year and flat for the busy summer fourth quarter.

Bonhill-Smith said she was confident both Ryanair and Easyjet would offset the lower demand from British travelers through the expansion of alternative hubs across Europe.

"Both of them have launched several new routes from other European airports this year," she told DW. Ryanair said it added 406 new routes and nine new bases last year, while Easyjet added 7% capacity last year from its new Berlin hub alone.

Read more: Mallorca aims for refined cocktails, not party tourism

Down but not out

Changing consumer tastes have battered revenues at traditional tour operators like TUI and Thomas Cook in recent years. To add to their woes, they've also been hit hard by shrinking demand due to Brexit, particularly as some British tourists have snubbed European destinations when choosing their annual holidays.

Thomas Cook admitted last week that more than 40% of its package holidays remain unsold. Its share price plummeted to just 10p after its third profit warning and a 1.5 billion pound half-year loss.

On Monday, the company had to reassure holidaymakers that it wasn't about go bankrupt and leave them stranded, just as when competitors Monarch Airlines and Flybmi collapsed recently.

German competitor TUI, which is listed on the London Stock Exchange, also reported widening losses in the first half. It said earlier this year that holiday bookings had stalled due to Brexit uncertainty and the struggling pound.

Global Data's Bonhill-Smith said the travel and tourism sector had no choice but to "wait out" the next few months.

"I don't think travel flows between Britain and the rest of Europe will stay as they are when we know the outcome of Brexit," she added.