Ryanair shares up despite sterling hit

Ryanair shares rose over 2.5% even as the airline cut its profit guidance as the slump in sterling following Britain’s vote to quit the EU weighs on fares, after previously holding out against a revision.

Net income in the year ending March 31 will increase by about 7% rather than the 12% previously estimated as sterling’s slide has a bigger than anticipated impact on yields, said chief executive Michael O’Leary, who spoke out against the risks of Brexit on various media shows in Britain in the run-up to the poll.

The pound has slid 15% against the euro since the June 23 referendum, reducing the value of sales in a UK market that is Dublin-based Ryanair’s biggest, with a quarter of revenue, when translated into euros.

“While higher load factors, stronger traffic growth and better cost control will help to ameliorate these weaker revenues, it is prudent now to adjust full-year guidance,” Mr O’Leary said.

He added that the outlook might have to be revised again if the pound or fares fall further.

The budget airline is finally quantifying the impact of sterling’s slide months after rivals including EasyJet and British Airways and Aer Lingus owner IAG reined in expectations following the Brexit vote.

Net income is likely to be in a €1.3bn to €1.35bn range, rather between €1.375bn and €1.425bn as previously stated, it said.

Yesterday’s gains have pared Ryanair’s share losses this year to 17%, compared with a 33% slump in a basket of European airline shares.

EasyJet, whose shares rose 5% yesterday, have lost about 47% of their value this year. IAG shares also rose but have slid 36% this year.

The earnings revision is “mild” in comparison with those of some of Ryanair’s competitors, Cantor Fitzgerald analyst Rob Byde said in a note.

He reiterated his “hold” rating, saying the stock has previously outperformed the sector. Ryanair is being squeezed both by a real fall in fares and the lower value of sales made in pounds, Mr Byde said.

Sterling’s decline means average fares will drop by between 12% and 15% in the second half, rather than the forecast 10% to 12%, Ryanair said.

Ticket prices tumbled 10% in the first half after the carrier had forecast a 9% slump, though the slide was partly offset by deeper cuts in expenses, with full-year unit costs now forecast to fall by 3% rather than 1%.

Ryanair’s 12-month load-factor — a measure of seat occupancy — should also be 1 percentage point better than the forecast 94%, it said, pushing the passenger count to 119m, 12% more than last year’s tally.

Bloomberg and Irish Examiner staff