Ryanair shares fall after profits warning

RYANAIR’S shares plunged more than 8% yesterday after the airline warned full-year profits are likely to be lower than previously forecast.

It said profits for the year will be at the lower end of a forecast of between €200 million and €300m.

It also said the decline in full-year yield will be worse than the 20% drop previously estimated.

Deputy chief executive Michael Cawley refused to comment on the fall in the share price, but he said the airline is on-track to grow passenger numbers to 100 million by 2012.

Fares will fall by 20% this year and by 5% next year, he said.

Chief financial officer, Howard Millar said: “It is going to be a pretty tough winter, fares are going to fall. There are no signs of recovery in any major economy in Europe; there are no signs of green shoots at all.”

Ryanair wrote down its stake in Aer Lingus by €13.5m in its first quarter and said any further write down will depend on the share price.

Mr Cawley said the airline will not be making a third bid for Aer Lingus adding that “it is up to the Government to come and talk to us”.

He also said there will be no short-term movement on the establishment of a long-haul Ryanair service.

Ryanair reported a profit of €136.5m in the first quarter, recovering from a loss of €90.5m last time, helped by the fall in oil prices and a smaller write-down on its stake in Aer Lingus.

Revenue dropped less than 1% to €774.7m.

Ryanair may outperform Europe’s biggest carriers such as Air France and British Airways which will both probably post losses when they report quarterly earnings this week, after profits last year, analysts say.

The airline said expansion in countries such as Italy and Norway will help it increase the number of passengers 15% this year.

Davy analyst, Stephen Furlong said: “Putting the numbers in context, Ryanair will be more than doubling profits in a period when most competitors are contracting, exiting the market and/or incurring significant losses.

“We continue to believe that the current protracted downturn is creating an environment and cost structure which will leave Ryanair as the dominant player in the European market.”

In June, Ryanair said it will stop passengers from travelling with anything other than carry-on luggage starting next spring, saving it €20m annually.

Mr Millar said that while the company will keep up the pace of growth in the short term, the airline will be “a different type of carrier” in a few years.

“Beyond 2012 we think growth will be more modest. You can’t forever grow at 15%, it would just blow up,” he said.

Ryanair’s shares closed down 8.4% yesterday.

Before yesterday, Ryanair had gained 13% in Dublin trading this year, making it the best performer in the Bloomberg Europe Airlines Index.