Ryanair is cutting fares to counter terrorism fears

Ryanair plans for lower airfares
Ryanair plans for lower airfares

Top European airline Ryanair will slash fares in the coming months to keep people flying after a recent spate of terror attacks.

Ryanair (RYAAY) CEO Michael O'Leary told CNNMoney that attacks in Brussels and Paris, combined with worries that terrorists brought down EgyptAir flight 804 over the Mediterranean last week, could lead some people to stay at home. But low fares would persuade them to get back out again.

"[When] people become a little bit more reluctant, we roll out lower prices and more stimulatory airfares, and people respond by snapping up those cheap prices," he told CNNMoney's Nina dos Santos.

"We are lowering fares. We'll continue to lower airfares and keep people flying, not just this summer but for the remainder of the year as well."

The company expects average airfares in the year to March 2017 to decline by 7%, with particularly hefty discounts in the autumn and winter periods.

Ryanair is not alone in experiencing disruption to its business. EasyJet (ESYJY), Lufthansa (DLAKF) and International Airlines Group, which owns British Airways and Iberia, have all suffered a hit to sales as passengers reconsidered travel plans because of security concerns.

Analysts say cutting prices will stoke demand, but not everyone is convinced that customers who are truly concerned about terrorism will be persuaded to fly again. The low fares may simply stimulate demand among people who weren't too worried in the first place.

"I think Ryanair's strategy of lowering fares works twofold by both spurring demand from travelers and also by widening the gap between Ryanair fares and its competitors," said David Holohan, chief investment officer at Merrion Capital Group.

Related: Lowest airfares in 7 years this summer

Ryanair has become the biggest airline in Europe by offering cutthroat prices. More than 106 million people flew with the company in the year to March. That was up 18% on the previous year. The average Ryanair flight cost €46.67 ($52.33) in 2015-16.

Ryanair was forced to cancel 500 flights, affecting up to 95,000 people, in the first few months of 2016 due to the Brussels terrorist attacks and strikes by air traffic control workers in Europe. However, that represents a tiny dent in the business.

"It's a rounding error," said Mark Simpson, an airline analyst at Goodbody Stockbrokers.

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