Ryanair cuts profit fore­cast but says de­mand grow­ing

Kuwait Times - - BUSINESS -

DUBLIN: Ryanair cut its an­nual profit fore­cast yes­ter­day due to a weaker pound, but its share price rose after it said it ex­pected to boost its mar­ket share in the com­ing months by sell­ing more tick­ets at cheaper prices.

Europe’s largest low-cost air­line, which ex­pects ster­ling to ac­count for a quar­ter of its earn­ings this year, said an 18 per­cent slide in the pound against the dol­lar fol­low­ing the coun­try’s vote to leave the Euro­pean Union had forced it to cut its profit fore­cast by 5 per­cent. Fare prices may drop by be­tween 13 per­cent and 15 per­cent, it said. The air­line said it ex­pects net profit for the year to March 31 of be­tween 1.3 bil­lion eu­ros ($1.46 bil­lion) and 1.35 bil­lion eu­ros, down from a pre­vi­ous fore­cast of 1.375 bil­lion eu­ros to 1.425 bil­lion eu­ros.

The mean fore­cast of 16 an­a­lysts polled by Reuters ahead of the profit warn­ing was 1.38 bil­lion eu­ros. Ryanair’s warn­ing fol­lows a num­ber of sim­i­lar state­ments from ri­vals in­clud­ing low-cost car­rier easy­Jet and Bri­tish Air­ways-owner IAG and Ger­many’s Lufthansa. Chief Ex­ec­u­tive Michael O’Leary said the re­duced fore­cast “re­mains heav­ily de­pen­dent upon no fur­ther weak­ness in sec­ond-half fares or ster­ling from its cur­rent lev­els.” Hav­ing fallen 0.5 per­cent in early trad­ing, Ryanair shares were up 3.5 per­cent at 0933 GMT after O’Leary told an­a­lysts that he ex­pected Ryanair’s sales and mar­ket share to grow in the com­ing months.

“We are in a low-fare en­vi­ron­ment, but we like low­fare en­vi­ron­ments be­cause we are the low­est-cost pro­ducer,” O’Leary said. “We are tak­ing very sig­nif­i­cant traf­fic away from in­cum­bents ... and we see that con­tin­u­ing.” Ryanair’s pol­icy is to main­tain pas­sen­ger num­bers what­ever the fare and then earn money on ex­tras such as fees for choos­ing seats and on-board re­fresh­ments.

O’Leary said Ryanair planned to in­crease pas­sen­ger num­bers to 119 mil­lion from an ear­lier fore­cast of 117 mil­lion, pil­ing fur­ther pres­sure on com­peti­tors. Ryanair is cur­rently re­ceiv­ing around 50 planes a year from Boe­ing and O’Leary said he would con­sider adding more planes than sched­uled in 2018 or 2019. Ri­val easy­Jet, which de­pends on the UK for around half of sales, has al­ready cut its profit fore­cast by a quar­ter for the year to Sept. 30 in the wake of the Brexit vote.

Bri­tish air­line Monarch last week was kept alive by a 165 mil­lion pound ($205.18 mil­lion) bailout from in­vestors, hav­ing warned in Septem­ber that se­cu­rity con­cerns and the de­val­u­a­tion of the pound had made mar­ket con­di­tions dif­fi­cult. “Tough trad­ing con­di­tions are an op­por­tu­nity to make strate­gic progress at the ex­pense of weaker com­peti­tors,” Liberium an­a­lyst Gerald Khoo said in a note. —Reuters

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