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Ryanair hit by full-year profit warning as yields continue to fall

Published: 05:39 27 Jul 2009 EDT

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Shares in Ryanair Holdings PLC (LSE: RYA) were hit in early trade after the Irish no-frills airline announced that it expects net profits in the current year to come in at the bottom of the €200-€300 million range it has guided for, as a result of lower yields which in turn are caused by ongoing price wars in the industry and the recession.

The stock was trading down 10 percent by midmorning.

The statement accompanied Ryanair’s results for the first quarter to end-June 2009, which showed a pretax profit of €134.6 million compared with a loss of €90.5 million a year earlier. The company said the profit figures were distorted by a 42 percent reduction in fuel costs compared with the previous first quarter.
 
Total revenues were flat at €774.6 million due to an 11 percent rise in traffic being offset by a 13 percent decline in average fares.

CEO Michael O'Leary said: “Our outlook remains cautious for the remainder of the fiscal year. Traffic growth is strong but at much weaker yields due to the recession and the impact of tourist tax in Ireland and the UK. We have limited visibility beyond the next two months but expect passengers to be very price sensitive for the rest of the year.”

“We remain on track to deliver traffic growth of 15 percent to 67 million passengers. We intend to use fuel and other cost savings to fund continuous fare reductions. As a result we expect Q2 yields will be significantly lower than last year, at or even slightly above the minus 15-20 percent range previously guided,” he added.

The two newest bases at Pescara and Trapani in Italy are performing well and Ryanair will open its 33rd European base at Porto, Northern Portugal in September.

The airline has previously announced plans to reduce winter capacity at Stansted by 40 percent or 16 aircraft because of what it calls BAA's “unjustified increase in airport charges and the damage done to UK tourism by the £10 airport duty tourist tax”.  It will switch a substantial number of its aircraft from Irish and UK bases this winter to other European bases where progressive airports and sensible governments are scrapping tourist taxes and/or reducing airport fees, in some cases to zero, it added.

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