Shares in Ryanair rose 5.5% as the airline’s pledge to win more passengers and to hit its earnings target reassured investors who have been spooked by the extraordinary turbulence facing the industry.
Airline shares have slumped this year as terror attacks, European air traffic control and airport strikes, and the slump in the value of sterling against the euro and the dollar following the vote last month by the UK to exit the EU, have shaken many airlines.
Shares in IAG — which owns Aer Lingus, British Airways, and Iberia — nosedived 33% this year, while easyJet, which derives half its revenues from the UK, has lost a third of its value since the Brexit vote.
Ryanair shares yesterday rose to €11.50, as it said that it was aiming to fly many more passengers during its financial year through March 2017.
Ryanair shares are still 23% lower than at the start of the year, but investors had been braced for bad news.
“There was a lot of fear in the market,” said Stephen Furlong, analyst at Davy Stockbrokers, saying that while rivals were struggling, Ryanair was focusing on markets that offered growth. The analyst stuck to his share price target of €14.
Darren McKinley, analyst at Merrion Capital, said Ryanair was chasing that growth by shifting some its focus away from the UK and into Germany, to take on Air Berlin and Lufthansa.
“They didn’t lower their guidance through March 2017. They have a fair idea of the way the market is going through the rest of the summer months,” Mr McKinley said. He has a price target of €15.50 over the next year.
While the airline still faces a cocktail of risks from Brexit, which may force it to cut profit forecasts later in the year, chief executive Michael O’Leary said he “did not see the evidence to justify a cut” right now.
He said Ryanair still sees profits after tax of between €1.375bn and €1.425bn, an increase of 13% on last year.
“I don’t think any other airline in Europe will be delivering or forecasting that kind of profit growth,” he said. “But all of the clouds on the horizon suggest there are significant risks to the downside in the second half of the year.”
Ryanair said average fares would be down 8% in the six months to the end of September compared with an earlier forecast for a fall-of up to 7%.
Fares were 10% lower in the three months to the end of June compared with an 8% fall in revenue per passenger reported by easyJet. Ryanair is only dependent on Britain for around a quarter of its revenue, and it has a significantly lower cost base.
Additional reporting by Reuters
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