Shares in Ryanair plunged more than 20% in Dublin today as the airline reported an 85% fall in first-quarter profit as its fuel bill rocketed. It also warned it could make a full-year loss of up to €60m if oil prices stayed high and fares fell.
After diving as much as 25% shortly after the market opened this morning, the shares closed down 73 cent (22.6%) at €2.50.
Ryanair said adjusted profit after tax for the three months to the end of June came to €21m, down from a figure of €139m the same time last year and compared with analysts forecasts of €48.8m.
First quarter revenues rose by 12% to €777m from €693m, but the increase was again well below average forecasts. As well as oil, the timing of Easter this year also had an adverse impact on its first quarter figures.
The airline said its fuel bill rose by 93% to 367m in the first three months of its trading year. Fuel now represents almost 50% of its total operating costs compared to 36% last year.
Passenger traffice grew by 19% to 15 million, while load factors at 81% were almost in line with the same time last year, despite the Easter impact.
Ancillary revenues grew by 25%, again faster than the rate of traffic growth. Ryanair said it expects this trend to continue.
Ryanair said it had made use of a recent fall in oil prices and hedged 90% of its fuel needs for September at $129 per barrel, 80% for the third quarter at $124 per barrel, but remained unhedged for the fourth quarter.
'On the basis of our existing fuel hedges, and average fares falling by 5% for the full year, we expect to record a full year result of between breakeven and a loss of €60m,' CEO Michael O'Leary said in a statement.
The airline said that consumer confidence was plummeting in an emerging recession in the UK and Ireland, which it planned to respond to by cutting fares more aggressively than competitors.
Ryanair also said that it has been forced to write down €93.6m of its stake in Aer Lingus due the stock market turmoil.
'The outlook for the remainder of the fiscal year which is entirely dependent on fares and fuel prices remains poor,' Mr O'Leary said.
He repeated, however, that Ryanair's more than €2.2 billion in cash will help it weather the industry downturn and anticipates a strong rebound in earnings as rivals with higher costs or less assets suffer.
'The capacity reductions which will ensue from this winter's wave of airline bankruptcies and consolidations will create more opportunities for Ryanair to grow,' Mr O'Leary said.
'When oil prices fall significantly (as we believe they will over the medium term) then our earnings should rebound strongly. We have one of the strongest balance sheets in the industry and the business continues to be strongly cash generative with over €2.2 billion in cash,' he added.
'Ryanair is the best positioned airline in Europe to take advantage of the opportunities that these very difficult trading conditions will create,' he concluded.
