Skift Take
While an expected profit of almost $1.5 billion is still mighty impressive, the warning signs are there that a prolonged period of Brexit-based uncertainty is likely to be very bad news for airlines.
Ryanair has followed rival EasyJet in sounding the alarm over the UK’s historic vote to leave the European Union.
The Dublin-based carrier has warned that profits for the year will likely fall by five percent to a new range of between $1.4 and $1.49 billion (€1.30 to €1.35 billion) in this year through the end of March 2017.
The airline blamed its woes on the fall in the value of the pound post-Brexit. Sterling accounts for around 26 percent of revenues, and average fares in the second-half of the year fell by between 13 and 15 percent as opposed to the previously expected 10 and 12 percent. Fares in the first half were also slightly weaker.
The pound has taken a battering since June 23 and is now worth around €1.1 and $1.2 down from €1.3 and $1.5.
Despite the expected fall in profits, Ryanair expects that traffic will increase by 12 percent to 119 million customers.
“The recent sharp decline in sterling post Brexit (which accounts for approximately 26 percent of Ryanair’s fiscal year 2017 revenues) will weaken [second half] yields by slightly more than we had originally expected,” said Ryanair CEO Michael O’Leary.
“While higher load factors, stronger traffic growth and better cost control will help to ameliorate these weaker revenues, it is prudent now to adjust full year guidance which will rise by approximately seven percent (over FY 2016) rather than our original guidance of 12 percent. This decline is primarily due to the impact of weaker sterling on our [second half] fares.”
Ryanair is the latest airline to take a hit following the Brexit vote. Both EasyJet and British Airways parent company IAG have already issued profit warnings.
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Photo credit: Ryanair has issued a profit warning... but still expects to make almost $1.5 billion in its current financial year. Several of its aircraft are pictured here. Ryanair