DUBLIN – Shares in Ryanair slumped after Europe’s top budget airline issued a new, harsher profits warning and pledged to maintain heavy fare discounts to keep aircraft full.
Stock in the Dublin-based carrier fell 11.5 per cent to 5.40 euros ($7.30), a two-month low.
Ryanair had issued an initial, milder profits warning Sept. 4 citing weaker-than-expected demand and the need to reduce the average price of fares. Monday’s forecast means the airline is on course to record its first major drop in profits following two decades of industry-leading expansion.
Chief executive Michael O’Leary said projected profits for the fiscal year 2014 would fall to a range of 500 million euros to 520 million euros ($675 million to $700 million), reflecting expected heavy losses in the weaker winter months.
Ryanair had previously said profits would grow to up to 600 million euros for the 2014 fiscal year, following net profits of 569 million euros last year. O’Leary cited declining demand across Europe as the sole reason for the weakened outlook.
He said Ryanair would keep seats filled by lowering fares an average 9 per cent in the current quarter and potentially more in the first quarter of 2014.
Ryanair’s first-half results offered no surprises. Sales for the April-September period rose 5 per cent to 3.26 billion euros as the airline carried 49 million passengers, a 2 per cent gain. Net profits rose 1 per cent to 602 million euros.
The forecast means Ryanair expects to record second-half losses of up to 100 million euros.
Ryanair also announced it would introduce fully assigned seating in February, a significant cultural change for the company that reflected heavy customer criticism of existing policies.
For decades Ryanair had required passengers to form lengthy queues to maintain position for an at-times unseemly scramble for unassigned seats. That practice saved Ryanair costs but meant couples, families or groups sometimes couldn’t sit together.
O’Leary said passengers wishing to book a particular seat would be charged 5 euros ($6.75) each, while all others would be assigned seats for free the day before the flight.
O’Leary said he expected Ryanair to resume expansion as it starts to receive the first aircraft from a blockbuster 175-plane deal with sole supplier Boeing. “High-cost competitor airlines are continuing to cut capacity in major markets such as France, Germany, Poland, Spain and Italy, and this continues to create growth opportunities for Ryanair,” he said.