Business Irish

Sunday 25 August 2019

Challenges looming for Ryanair this summer, says broker

Orders: Ryanair chief executive Michael O'Leary has previously branded the Boeing Max aircraft as a 'gamechanger.' Photo: PA
Orders: Ryanair chief executive Michael O'Leary has previously branded the Boeing Max aircraft as a 'gamechanger.' Photo: PA
John Mulligan

John Mulligan

Shares in Ryanair fell more than 2pc in early trading yesterday, after Goodbody Stockbrokers downgraded the stock to hold and cut its profit estimates for the carrier.

The broker said the airline faces summer headwinds and has estimated its costs could be €10m higher during the current financial year if it can't operate the new Boeing Max 8 jets that it's due to take delivery of during the period.

The jets have been grounded around the world following two fatal air crashes, the most recent of which saw an Ethiopian Airlines Max 8 plunge to earth just minutes after takeoff.

"We see the carrier facing both revenue and cost headwinds into the all-important summer season," said Goodbody analyst Mark Simpson.

The broker has cut its forecast for profit after tax at the airline for the current financial year - which ends next March - to €960m. That's 7pc lower than the current consensus figure among analysts.

"Lower summer capacity growth forecasts now seem to be more than offset by weakening demand," said Goodbody.

"While Ryanair has always been cautious on summer yields, we expect its commentary on May 20 [when it releases results for its 2019 financial year] to be downbeat," it added.

Goodbody has also predicted that Ryanair's unit costs "may disappoint". The broker said it had pencilled in a small cost reduction due to the expected arrival of 47 Max 8 aircraft during the financial year.

However, in the event that Max 8 jets aren't permitted to fly again during the financial year, it would add €10m to Ryanair's costs, excluding fuel.

JP Morgan reckons that it could be sometime between August and November before the jets return to service across the globe.

Goodbody also said that a Brexit resolution would be a "major positive" for Ryanair.

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