Ryanairs annual profit is set to fall for the first time in five years as fierce competition in Europe lowered average fares down by around 10% over the winter months, Europes largest airline by passenger numbers said today.
Europes largest low cost carrier forecasts annual earnings may drop under the level of 2012,2013 when it reported profit of 569 million euros. Two months after making its first profit warning in a decade, the Irish budget carrier cut its profit forecast further for the year to March to 500-520 million euros from 570 million euros.
“The continuing fare and yield softness means that full-year profits will be lower than previously guided (570 million to 600 million euros). We now expect the full-year out-turn to be between 500 million and 520 million due entirely to this lower fare environment.” the company said.
Ryanairs profit warnings were followed by series of customer service improvements announced in September aimed at attracting customers from rivals. Chief Financial Officer Howard Millar said passenger numbers were stable and on-board spending was growing. However, he added that people were mostly booking discount fares, a sign Europe may not be recovering as quickly as many people hoped.
The airline earnings were in line with analysts forecasts with a profit of 602 million euros for six months to September, up 1% on the year, as a fall of 2% in average fares was compensated by a 22% rise in extra charges. Ryanair reported revenue of 3.3 billion euros for the six months to September 30, up 5% compared with the same time last year. Net profit climbed 1% to 602 million.
According to the company forecast, Ryanair will return to traffic growth from September 2014, as it starts receive new aircraft deliveries.
“Investors need to decide whether Ryanair can drive sufficient traffic growth and yield increases in [2014-15] and onwards to deliver a return to attractive earnings growth,” James Hollins, analyst at Investec said for Financial Times.
Shares in Ryanair are down more than 11% at 5.39 euros per share at 9:56 in London trading.