Ryanair issues profit warning

Ryanair today issued a profit warning due to a steeper fall in winter air fares blamed on airline over capacity in Europe.

Europe’s largest no-frills carrier lowered its full year profit guidance from a range of €1.1 billion to €1.2 billion to a new range of €1 billion to €1.1 billion, excluding Austrian arm Lauda.

Winter fares are expected to drop by 7% against a previous estimate of a 2% decline.

The revised guidance excludes exceptional start-up losses ar Lauda, which have been cut by €10 million to €140 million on the back of better than expected unit cost performance during the winter.

Ryanair revealed the reduced annual profit forecast despite stronger traffic growth of 9% to 142 million passengers, higher ancillary sales and a better cost performance in the second quarter of the airline’s financial year.

Chief executive Michael O’Leary said: “While we are disappointed at this slightly lower full year guidance, the fact that it is the direct result of lower than expected second half air fares, offset by stronger than expected traffic growth, a better than expected performance on unit cost and ancillary sales is positive for the medium term.

“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.

“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.”

He added: “While we have reasonable visibility over forward Q4 bookings, we cannot rule out further cuts to air fares and/or slightly lower full year guidance if there are unexpected Brexit or security developments which adversely impact yields between now and the end of March.”

O’Leary said: “Both Ryanair and Lauda will report stronger than expected traffic growth, an improving ancillary revenue performance, and strong unit cost discipline this winter, which helps to defray the impact of these lower than expected winter fares.

“The fact that we are passing on these benefits, in the form of lower air fares, to customers is good for Ryanair’s traffic growth, good for our business over the medium and long term, and good for market share as evidenced by Norwegian’s recent announcement of its plans to close bases in Rome, Gran Canaria, Tenerife and Palma, where they competed head to head with Ryanair.

“As we are in a closed period, we will update shareholders in detail on these developments following our Q3 results release on February 4.”

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