Ryanair says it could miss yearly profit target

Ryanair experienced sharp share drop on Wednesday after the company warned that full-year profit was expected to come in at the bottom end of its target range after increased competition depressed ticket pricing.

The Irish company stated weaker than anticipated average fares for the third quarter meant it anticipated net profit would be at the lower end of its guidance of between 570 million euros to 600 million euros for the year to the end of March 2014.

“However, if fares . . . continue to weaken over the coming winter there can be no guarantee that the full-year [net profit] out-turn may not finish at or slightly below the lower end of this range,” added Ryanair, indicating that in these circumstances it might generate less than 570 million euros of net profit in 2013-14.

Analysts expectations of Ryanairs net profit were of slightly under 650 million euros for 2013-2014 period. Investors are disappointed as the airline company has a history of outperforming its targets.

Damian Brewer, analyst at RBC Capital Markets, said for Financial Times: “Ryanair has historically delivered results well ahead of its own guidance so this is disappointing news.”

The company is trying to compensate low prices by cutting aircraft capacity during the winter and said it expects to carry just under 81 million passengers in 2013-14, compared with a previous target of more than 81.5 million. Capacity reductions can enable airlines to raise fares.

While the situation improved in August, Michael O’Leary, Ryanair’s chief executive, explained the company had noticed a “perceptible dip in forward fares and yields into September, October and November” because of several factors. Some of them were increased price competition and capacity increases in the UK, Scandinavian, Spanish and Irish markets, the continuing effect of austerity and weak economic conditions across Europe, and the negative impact of exchange rates involving sterling and the euro.

Ryanair’s shares slid more than 14% to 5.82 euros in early Dublin trading.