Ryanair profit warning knocks €1.3 billion off market value
More than €1.3bn was wiped off Ryanair's market value after shares in Ireland's second-biggest company plunged on the back of a profit warning.
Shares in Europe's biggest low-fares airline slumped over 14pc at one stage, marking one of the sharpest single day declines ever witnessed by investors in the carrier. It was one of the biggest one-day falls in market value ever of an Irish company. Nearly €1.6bn was wiped off the value of CRH in a day in 2010 after a profit warning.
In 2004, Ryanair shares tumbled over 30pc in a day when it issued a profit warning. Even the day of the 2001 US terror attacks, Ryanair shares fell just 7pc.
Shareholders dumped the stock yesterday after Ryanair – which on Tuesday had a market capitalisation of about €9.6bn – said that its forward yields (the average price paid per ticket) and bookings have remained softer than expected for September, October and November.
Chief executive Michael O'Leary insisted the declines were "marginal and around the edges" but conceded there was weakness across its European markets at the moment.
"We're not talking about some collapse or catastrophe," he insisted, "but it is weaker than we had expected it to be."
He blamed weaker sterling-euro exchange rates as the key factor currently impacting yields and fares, but also cited increased price competition and some capacity increases in UK, Scandinavia, Spanish and Irish markets as well as continuing austerity and weak economic conditions in Europe.
Mr O'Leary said the airline, traditionally cautious with its fiscal outlooks, is now lowering its expected profits for the financial year that ends next March to the lower end of a €570m to €600m range that it had previously forecast. But some analysts, because Ryanair is usually so conservative in its forecasts, had already pencilled in profits of as much as €640m for the year.
Spooked by Ryanair's profit warning, the shares plunged. The rout also dragged down other airlines and the broader ISEQ Overall Index.
Shares in Aer Lingus fell over 6pc while those in Easyjet plunged over 7pc after the Ryanair announcement. Lufthansa declined over 5pc, while Air France-KLM was nearly 4pc lower. Shares in British Airways and Iberia owner IAG were down over 5pc at one stage.
Ryanair had already warned that there had been some weakness in forward bookings and it said that while business had picked up in August, the overall weakness had persisted.
He said the airline was this week embarking on a marketing blitz with seat sales to fill aircraft. He also warned that if the current weakness persisted, there was an outside chance that the full-year profit figure could dip below €570m.
"The bookings and fares have been weaker in September, October and November, and we'll respond to that with lower fares," he said.
"We want to make sure our forward bookings run a couple of percentage points ahead of where they were last year."
"Could we go below the €570m figure for the year? Yes we could. On balance at this stage, I suspect it's unlikely, but it may be 6-4 against," he said. He explained that average fares would have to decline much further for that to happen.