Ryanair's lowered guidance is a sign of how tough things are for European airlines at the moment. Fortunately, the airline is still highly profitable; the same can't be said for some of its smaller rivals.
Ryanair Holdings Plc shares dropped to a four-year low after the airline cut its full-year profit guidance, citing an industrywide slump in ticket prices and over-capacity across Europe this winter.
The region’s biggest discount airline now expects an after-tax profit in the range of 1 billion euros ($1.1 billion) to 1.1 billion euros ($1.3 billion), excluding its new Lauda unit, for the year through March compared with 1.1 billion euros ($1.3 billion) to 1.2 billion euros ($1.4 billion) previously, it said in a statement Friday.
Earnings have been hurt by lower winter fares, which are expected to fall 7 percent instead of 2 percent as previously guided. That’s largely offsetting the impact of higher passenger numbers, cost improvements and stronger sales of optional items.
Ryanair’s battle with unions, bad weather and air-traffic-control strikes has also taken a toll, with passenger growth lagging well behind rival Wizz Air Holdings Plc, which poses an increasing threat, especially in its Eastern European stronghold.
The Irish company’s Chief Executive Officer Michael O’Leary said he’s “disappointed” with the lower guidance. Investors will be upset, too. Ryanair previously cut its fiscal 2019 profit guidance by 12 percent only in October, citing labor strife and fuel costs.
The low fares will “continue to shake out more loss making competitors,” citing potential sales of Wow, Flybe and possibly Germania, the CEO said, warning that he’s not ruling out further fare cuts and a further lowering of full-year guidance on Brexit or security developments.
Ryanair shares fell as much as 5.2 percent, the most in two months, to 9.55 euros at the start of trading in Dublin, taking the drop to 41 percent over the past year. Discount rivals Easyjet Plc dropped as much as 5 percent and Wizz Air Holdings 4.5 percent in London.
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Photo credit: A Ryanair jet. The carrier has lowered its profit guidance for 2019. Alan Wilson / Flickr