Ryanair issues 2nd profit warning in 2 months expecting a loss for 2nd half of 2013/4 – due to “weak demand”
Ryanair has issued its 2nd profit warning in 2 months. It expects losses in the 2nd half of 2013-14 which is its first fall in profits for 5 years. The airline has recently cut fares, in an attempt to attract more passengers against increased competition, less demand and weak economic conditions. Ryanair is as determined as ever to keep on growing (for growth’s sake). It aims to increase its passengers from 79.3m in 2012-13 to 110m in 2018-19 . It now says its forecast profit for the year to March 2014 will be some €500 to €520 million, while in September it predicted more like €570 million. Ryanair hopes low fares attract more passengers, who then spend more on other extras and services. Other budget airlines are competing for Ryanair’s customers, eg. Norwegian Air Shuttle, Vueling and Wizz Air. Ryanair is to offer fully allocated seating from 2014 to try and improve its image – and attract business customers – as passengers complain about the rush to get on board to secure the best seats.
Ryanair to offer fully allocated seating
Ryanair is to offer fully allocated seating from next year as the company issued its second profits warning in two months.
The no-frills airline will introduce the measure in response to complaints from passengers fed up with the rush to get onboard to secure the best seats.
From February 1 2014, travellers can pay £5 to select a specific seat when checking-in more than 24 hours before departure, or pay nothing and be automatically allocated a seat within 24 hours of departure.
The airline currently allows customers to pay an extra fee for certain rows of seats on its aircraft. This new move brings Ryanair into line with no-frills rivalEasyjet which began allocated seating last year in an attempt to target more business travellers.
Ryanair also admitted that profits were going to be lower than previously expected for its current financial year – down from a forecast profit of €570 million to €510 million for the year ending in March 2014. The airline made a €569.3 million profit after tax last year.
The airline blamed “continuing fare and yield softness” for the likely drop in profits. The warning sent Ryanair shares tumbling by more than 9 per cent to €5.52 per share in trading on Monday.
Ryanair saw post-tax profits rise by just 1 per cent to €602 million in the six months to the end of September with passenger numbers up by 2 per cent to 49 million and revenue increasing by 5 per cent to €3.25 billion, although average fares dropped by 2 per cent over this period.
Chief executive Michael O’Leary blamed the fall of fares on factors such as this summer’s heatwave in Europe, industrial action by air traffic controllers and a weaker pound.
“Ryanair has responded to these market conditions by stimulating traffic growth with aggressive fare promotions,” added O’Leary.
“This will lay the foundation for traffic growth over the coming years, particularly as our new 175 aircraft deliver from September 2014.
“While fares are falling, ancillary revenues grew strongly by 22% to €713 million, driven by the successful roll-out of reserved seating, priority boarding and higher credit/debit card fees.”
The move to fully allocated seating comes just two weeks after the airline said it would be reducing some of its other passenger charges and fees.
Ryanair cuts outlook for second time in two months
By Andrew Parker
November 4, 2013 (FT)
Ryanair’s shares plunged on Monday after Europe’s largest low-cost carrier by revenue issued its second profit warning in two months.
Article in the FT at http://www.ft.com/cms/s/0/26f1e028-451e-11e3-b98b-00144feabdc0.html#axzz2jsCrl141 ££
Ryanair may miss profits target
Ryanair has admitted it could miss its profits target for the current financial due to lower fares and yields during the autumn.
The company said in an announcement to investors that it was expecting net profits to be at the “lower end” of its previous forecast of between €570 million to €600 million for its financial year running to March 2014.
“However if fares and yields continue to weaken over the coming winter there can be no guarantee that the full year outturn may not finish at or slightly below the lower end of this range,” said Ryanair in a statement.
The surprise announcement sent Ryanair’s shares tumbling by as much as 15 per cent in early trading from yesterday’s close of €6.79 per share to €5.77.
Chief executive Michael O’Leary (pictured) said that bookings had been adversely affected by July’s heatwave across northern Europe but had returned to “some normality” in August.
“However in recent weeks we have noticed a perceptible dip in forward fares and yields into September, October and November,” added O’Leary.
“We believe this is due to a combination of factors: increased price competition and some capacity increases in the UK, Scandinavia, Spanish and Irish markets, the continuing effect of austerity and weak economic conditions across Europe, and weaker sterling/euro exchange rates.”
O’Leary said that Ryanair would be “selectively reducing our winter season capacity” with traffic targets being trimmed from 81.5 million passengers to “just under 81 million” for the current year.
“We are also rolling out a range of lower fares and aggressive seat sales particularly in those markets mainly UK, Scandinavia, Spain and Ireland,” he added.
Ryanair made a post-tax profit of €569.3 million during the 2012/13 financial year.