Ryanair Lowers Profit Outlook on Slump in Pound
October 18 2016 - 4:30AM
Dow Jones News
LONDON—Ryanair Holdings PLC, Europe' biggest budget airline,
warned on Tuesday that earnings will grow more slowly than expected
after the slump in the British currency following the Brexit
vote.
The U.K. is an important market for Ryanair which sells some
tickets in sterling, sales that are now worth less in euros, the
currency in which the Ireland-based carrier reports earnings.
Ryanair said 28% of its €6.54 billion ($7.19 billion) revenue last
year came from operations in the U.K., though some costs are also
in pounds.
Shares in Ryanair fell 3% in early trading.
Britain's vote in June to exit from the European Union, leading
to a drop in sterling to more than 30-year lows, has weighed
heavily on European airlines with big operations in the U.K. like
Ryanair.
Hours after result of the June 23 Brexit vote, British
Airways-parent International Consolidated Airlines Group SA issued
a profit warning. British budget carrier easyJet PLC followed soon
after.
Ryanair, Europe's largest airline by passengers, said net profit
is now expected in the range of €1.3 billion to €1.35 billion in
the year to end-March, adjusted down from €1.375 billion to €1.425
billion.
"The primary cause of this slightly lower growth in full-year
profitability is the 18% fall of sterling post Brexit," Ryanair
said.
Ryanai Chief Executive Michael O'Leary said a further fall in
the British currency could force earnings expectations down
again.
The pound's loss in value against the euro and other major
currencies isn't the only issue airlines in Europe have been
grappling with this year.
Fierce competition has caused ticket prices to fall,
particularly with the decline in demand for travel to many
destinations after terrorist attacks in Europe and Turkey this
year. The industry has also endured operational disruptions from
repeated air-traffic control strikes across the continent.
Deutsche Lufthansa AG in July said the effect of terrorist
attacks on sales would cause profit to fall this year, days before
Air France-KLM SA said savings from lower fuel were more than wiped
out by the fall in ticket prices.
Ryanair said average ticket prices now are expected to fall 13%
to 15%, down from a 10% to 12% retreat previously estimated.
Ryanair said it was partially able to mitigate the impact of
lower ticket prices through cost reductions. Full-year nonfuel
costs are now expected to decline 3% compared with a previous
projection of a 1% retreat.
"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," Ryanair's Mr. O'Leary
said.
Mr. O'Leary has been critical of Britain's vote to leave the
European Union. After the referendum he said Ryanair would cut
growth plans from U.K. destinations in the near future, allocating
new planes to other markets.
The airline said its policy of discounting fares to fill planes
would allow it to boost the number of passengers flown this year to
119 million, 2 million more than projected in July. Load factor, a
measure of seats sold, would rise to 94% for the year.
Write to Robert Wall at robert.wall@wsj.com
(END) Dow Jones Newswires
October 18, 2016 04:15 ET (08:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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