Ryanair predicts profit fall on surging price of oil
RYANAIR is forecasting a drop in profits on surging oil prices, the no-frills Irish airline said on Monday after it posted a 10 percent jump in annual earnings despite a crisis that forced it to cancel thousands of flights.
“Our outlook . . . is on the pessimistic side of cautious,” Ryanair said in a statement.
“Unit costs this year will rise nine percent due to higher staff and oil prices which will” add more than € 400 million ($469 million) to its fuel bill.
After initially falling, Ryanair’s share price was up 3.8 percent at 16.1 euros approaching midday in Dublin.
“A key question for the market to consider is whether Ryanair’s pessimistic outlook alongside strong full year results is a classic piece of expec- tations management or a true reflection of the challenges facing the business,” said Russ Mould, investment director at AJ Bell.
“After all Chief Executive Michael O’Leary’s ‘pessimistic side of cautious’ guidance sets a fairly low bar for the budget airline to clear.”
For its financial year 2017/18 that ended in March and spurred by a nine percent increase in passengers, or “guests” as the airline now describes its paying customers, net profit jumped to € 1.45 billion.
This was despite “a 3 percent cut in air fares, during a year of overcapacity in Europe”, O’Leary said.
The jump in profits came also despite “rising fuel prices, and the recovery from our September 2017 rostering management failure”, he added.
But Ryanair noted that there tended to be “a lag of up to 12 months before higher oil prices feed through to higher air fares”.
Oil prices have been trading at 3.5year highs in recent times owing mainly to worries about possible supply disruptions caused by the US decision to quit the Iran nuclear deal and unrest in Venezuela.
Meanwhile for Ryanair’s current financial year, the company on Monday said it expected profit after tax to fall to between 1.25 and 1.35 billion euros, despite it hoping to “grow traffic by seven percent to 139 million” passengers.
Ryanair has meanwhile applied for a British operating licence as part of its Brexit contingency plans.
Britain accounts for about onequarter of revenues earned by the Dublin-based carrier.