Saturday 23 February 2019

Ryanair's shares touch four-year low on fresh profit fears

Low-cost giant says winter fares will now fall by 7pc and cuts full-year profit guidance, but shares recover later

Shares in Ryanair sank below €10 for the first time in four years yesterday after the airline issued its second profit warning in three months. Photo: Reuters
Shares in Ryanair sank below €10 for the first time in four years yesterday after the airline issued its second profit warning in three months. Photo: Reuters
John Mulligan

John Mulligan

Shares in Ryanair sank below €10 for the first time in four years yesterday after the airline issued its second profit warning in three months.

Europe's biggest low-cost carrier now expects its full-year profit to be between €1bn and €1.1bn, compared to a previous estimate of between €1.1bn and €1.2bn.

It has blamed winter fares that are expected to fall by 7pc - more than three times the 2pc decline it had originally pencilled in.

Chief executive Michael O'Leary said the airline was "disappointed" with the lower profit guidance and warned that the carrier couldn't rule out another cut if there are "unexpected Brexit or security developments which adversely impact yields between now and the end of March".

He has also insisted that the tough winter trading period will result in a shake-out in the European airline sector, especially among smaller rivals. "We believe this lower fare environment will continue to shake out more loss-making competitors, with Wow, Flybe, and reportedly Germania for example, all currently for sale," said Mr O'Leary.

Iceland's Wow Air has tried to grab a share of the low-cost transatlantic market by using Reykjavik as a hub for travel between Europe and North America. A planned sale to bigger rival Icelandic recently fell through, with Bill Franke's Indigo Partners then coming to the rescue. Indigo plans to take a 49pc stake in Wow via a convertible loan.

UK carrier Flybe is being acquired by a consortium that includes Stobart and Virgin Atlantic, whilst Germania is also looking for a buyer amid financial difficulties, it's been reported.

Scandinavia's Norwegian Air has also been wrestling with financial woes. Norwegian has also announced plans to close bases in top tourist destinations such as Rome, Gran Canaria, Tenerife and Palma, where, as Davy Stockbrokers pointed out, it had competed head-to head with Ryanair.

Mr O'Leary warned that while Ryanair has "reasonable visibility" over forward bookings for the period to the end of March, it can't rule out further cuts to air fares and, or, lower guidance.

"There is short-haul over capacity in Europe this winter, but Ryanair continues to pursue our price passive/load factor active strategy to the benefit of our customers who are enjoying record lower air fares," he said. The airline will fill its planes at whatever price it needs to sell tickets to do so.

While Ryanair recently reported that its total passenger traffic for calendar 2018 was up 8pc at 139.2 million, the pace of growth was slower than the 10pc it notched up in 2017, and the 17pc advance recorded in 2016.

Ryanair shares fell 5.2pc before closing up slightly.

Irish Independent

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