Ryanair issues profit warning as fares continue to fall

Ryanair issues profit warning as fares continue to fall

Ryanair has lowered its full-year profit guidance blaming the falling prices of fares.

The low-cost carrier said it now expects to report profits of €1-€1.1 billion for the full year, down from the €1.1-€1.2 billion it had earlier suggested.

Fares are expected to fall seven per cent over the winter season, much more than the two per cent anticipated.

Ryanair 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 half two 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.

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“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.”

Ryanair shares slipped by 1.7 per cent this morning, to €9.85.

After a period of sustained falls, they are now trading at prices last seen in 2015.

Ryanair said the new guidance excludes the exceptional start-up losses at Lauda, which have been cut from €150 million to €140 million on the back of better than expected unit cost performance during the winter period.

O’Leary added: “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.”

Ryanair said it could not rule out further price cuts and would update investors during the third quarter earnings report on February 4th.