O’Leary loses €70m as share price slumps in profits warning
Ryanair blames strikes for €2bn hit
‘Confidence has been affected’
‘The impact was the uncertainty’
RYANAIR chief Michael O’Leary saw his personnel fortune plummet by around €70million in just a few hours as Ryanair’s share price slumped after it issued a reduced profits warning.
The firm’s stockmarket valuation dropped by nearly €2billion from almost €15billion when the stock market opened yesterday to just over €13billion when by the close of business.
The airline – Europe’s largest – blamed lower passenger numbers for forcing it to offer cheaper fares as flyers were scared away by a series of pilot and cabin crew strikes.
As a result, it said it was reducing its full year profits prediction from a current range of €1.25billion to €1.35bn, to between €1.10billion and €1.20billion.
Mr O’Leary admitted ‘customer confidence has been affected’ and added: ‘While we successfully managed five strikes by 25% of our Irish pilots this summer, two recent co-ordinated strikes by cabin crew and pilots across five EU countries has affected passenger numbers, through flight cancellations, close-in bookings and yields, as we re-accommodate disrupted passengers, and forward air fares into quarter three. While we regret these disruptions, we have on both strike days operated over 90% of our schedule.
‘However, customer confidence, forward bookings and quarter three fares have been affected, most notably over the October school mid-terms and Christmas, in those five countries where unnecessary strikes have been repeated.’
Mr O’Leary owns a reported 44.1million shares in the company which were worth an estimated €578million on Friday. But once the stock market opened yesterday and Ryanair made its revised profit forecast, the shares slumped by 13% over the day from €13.14 to €11.43 – a drop of €1.71. It is believed to have left Mr O’Leary’s stake worth €504million – resulting in a loss on paper of €74million.
However, Eoghan Corry, of the website travelextra.ie, said despite lowering the profit guidance the airline had always proved to be better than its own forecasts.
‘The thing is about bringing the guidance down is they’ve always erred on the side of caution, they’ve always overdelivered in terms of their profits so it’s no surprise they’ve used the opportunity to bring the guidance down,’ he added. ‘But they’ve had to sell a lot more €40 fares than €60 and €80. The summer didn’t deliver the yield they wanted because of the uncertainty created by the strike.
‘The impact of the strike wasn’t on the number of flights stopped but the uncertainty it created.’ Goodbody Stockbrokers analyst Mark Simpson said the warning came as a surprise given that Mr O’Leary had said there was no change to guidance just two weeks ago.
Ryanair warned just last week that the strikes were damaging business just as oil prices rose strongly and said yesterday its unhedged fuel costs have jumped as oil prices rise to $82 a barrel, hitting 10% of volumes for its current financial year and the entire fuel bill of Austria’s Laudamotion, which it agreed to buy.
To cope with the lower fares, higher oil prices and strike costs, Ryanair trimmed its winter capacity by 1%, removing aircraft from its Eindhoven, Bremen and Niederrhein bases which will result in more flight cancellations.
The company said it would seek to minimise job losses by offering pilots vacancies elsewhere and exploring unpaid leave and other options for cabin crew.