Ryanair shares slump on second profit warningMonday 04 November 2013 17.17
Shares in Ryanair closed more than 12.5% lower in Dublin trade today after it warned that its full year profit is likely to be significantly below expectations because of difficult trading conditions across Europe.
It is the second time in two months that the airline has had to lower its guidance to investors about how much profit it expects to make.
In September, Ryanair cautioned that profit for the year would be around €570m, when investors had been expecting the company to make in the region of €600m.
It is now said the number is likely to be closer to €510m.
Ryanair blamed a combination of stiffer competition, weak consumer spending across Europe and a fall in the value of sterling relative to the euro.
Announcing half year results this morning, the company said average fares had fallen by 2% and would continue to fall across the winter.
In the latest of a series of radical changes to the airline's no-frills model, Ryanair said it would allocate all seats on its planes, ending the often frenzied rush by passengers to secure the best seats.
But management said the recently announced changes, which included a halving of some baggage charges, would not have a significant impact on the current financial year.
During the six-month period to the end of September, Ryanair's pre-tax profit was up 1% to €602m compared to the same six months in 2012. Passenger numbers rose by 2% to 49 million.
Revenue per passenger increased by 2% on the back of a 22% rise in ancillary revenues in the six-month period driven by the successful roll out of reserved seating, priority boarding and higher credit and debit card fees. However, fuel costs climbed by 7%.
Several competitors, including Norwegian and Aer Lingus, have also warned of strong competition pushing down prices.
While Britain's EasyJet last week nudged up its pre-tax profit for the 12 months to September 30, it has not yet released figures for the October to March period where Ryanair is seeing weakness.
In its results statement today, Ryanair said that from February it will move to fully allocated seating on all its flights. Passengers who do not want to pay €5 to select their preferred seats will be allocated seats in the 24 hours before the flight goes.
The airline's chief executive Michael O'Leary said the move is Ryanair's response to the "enormous demand" from customers in recent weeks via the airline's new customer feedback initiative.
Over the last few weeks Ryanair has announced a series of customer services initiatives.
They include allowing a second small carry-on bag and a 24-hour "grace period" to allow passengers correct minor booking errors.
It also made upgrades to its website, including an improved booking path, which reduces the amount of "clicks" to make a booking from 17 to five.