Stansted: Ryanair profits to come in at lower end of forecast
- Credit: PA
Low-cost airline Ryanair is to reduce its flying schedules and cut fares this winter after seeing its profit hopes dented by growing headwinds.
The Dublin-based carrier, which is a major operator out of Stansted Airport, said increased competition and Europe’s continued economic problems were having an impact on fares and the amount of money it makes per passenger.
It said it will respond to the weaker outlook by selectively reducing its winter season capacity and rolling out lower fares and “aggressive” seat promotions in markets including the UK.
The strategy will cut its annual traffic forecast by 500,000 to 81 million while profits will be at the lower end of its previous forecast of between 570 million euros (£483 million) and 600 million euros (£508 million).
The update caused its shares to slide 14% in early trading, while Luton-based rival easyJet dropped 7% in the FTSE 100 index. Thomson Holidays owner TUI Travel and British Airways parent firm International Airlines Group were 4% lower.
Today’s warning comes a month after chief executive Michael O’Leary said July’s heatwave in northern Europe impacted on demand.
Mr O’Leary said today that booking patterns had returned closer to normality in August and the company’s guidance remained for a small increase in first-half profits but recent weeks had seen a dip in forward fares and yields into September, October and November.
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This was believed to be due to a combination of factors including increased price competition and some capacity increases, the continuing effect of austerity and weak economic conditions across Europe and weaker sterling/euro exchange rates, said Mr O’Leary.
He added: “We will respond to this lower yield outlook by selectively reducing our winter season capacity, thereby cutting our full year traffic target from over 81.5m to just under 81m. We are also rolling out a range of lower fares and aggressive seat sales particularly in those markets mainly UK, Scandinavia, Spain and Ireland.
“Ryanair remains confident that we will continue to hit our revised passenger targets albeit at lower fares and yields than originally expected. Accordingly it is prudent to advise shareholders that our full year profit after tax (PAT) guidance will now be at the lower end of our €570m to €600m range.”