Ryanair issues profit second profit warning after decline in winter fares
The low-cost airline has issued its second profit warning in the last four months, with lower winter fares offsetting a rise in demand, but its CEO is adamant the low-fare environment will pile pressure on loss-making rivals.
Ryanair has lowered its full year profit guidance by €100 million to a new range of €1 billion - €1.1 billion, with the low-cost airline blaming lower winter fares that have offset strong traffic growth, according to its recent trading update.
The airline expects winter fares to fall by 7%, which will reduce revenues despite a 9% increase in overall traffic growth.
Pricing out the competition
Ryanair admitted that it is disappointed by its lower full year guidance, but in adamant that its strategy, combined with the low fare environment in the sector will continue to reduce competition as rivals like WOW, Flybe and Germania have all been forced to put themselves up for sale.
‘There is short haul over capacity in Europe this winter, but Ryanair continues to pursue our price passive/load factor active strategy to the benefit of our customers who are enjoying record lower air fares,’ Ryanair CEO Michael O’Leary said.
‘We believe this lower fare environment will continue to shake out more loss-making competitors,’ he added.
Ryanair prepared to reduce fares further
Even with the downgrading of the company’s profit guidance the airline is still ready to reduce prices lower, as it expects to see traffic growth continue to surge and help it capture more market share.
‘The fact that we are passing on these benefits, in the form of lower air fares, to customers is good for Ryanair’s traffic growth, good for our business over the medium and long term, and good for market share as evidenced by Norwegian’s recent announcement of its plans to close bases in Rome, Gran Canaria, Tenerife and Palma, where they competed head to head with Ryanair,’ O’Leary said.
‘While we have reasonable visibility over forward Q4 bookings, we cannot rule out further cuts to air fares and/or slightly lower full year guidance if there are unexpected Brexit or security developments which adversely impact yields between now and the end of March,’ he added.
This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.
See an opportunity to trade?
Go long or short on more than 17,000+ markets with IG.
Trade CFDs on our award-winning platform, with low spreads on indices, shares, commodities and more.
Live prices on most popular markets
- Forex
- Shares
- Indices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
