Ryanair shares slump 15 pct on rare profit warning
- Article by: SHAWN POGATCHNIK
- Associated Press
- September 4, 2013 - 6:25 AM
DUBLIN — Shares in Ryanair suffered their biggest drop in four years Wednesday after Europe's top budget airline issued a rare profit warning due to low autumn ticket sales that reflected the weak economy and aggressive competition.
Chief Executive Michael O'Leary said his Dublin-based airline, which typically exceeds its profit forecasts, now expects to fall short of its previous 2014 outlook and might not reach its minimum sales target of 570 million euros ($751 million) for the fiscal year ending in March.
The company's shares fell nearly 15 percent to 5.78 euros ($7.62) — a five-month low and their biggest drop since October 2009 — as analysts expecting Ryanair to eclipse 600 million euros in profit warned that the airline now looked overvalued. Ryanair last issued a profit warning in 2004.
Ryanair's statement sent the shares of other European airlines lower Wednesday. Ryanair's top budget competitor, Britain's easyJet, fell 7.5 percent. International Airlines Group, the parent of British Airways and Spain's Iberia, fell more than 4 percent. Ryanair's main Irish rival, Aer Lingus, slid 5 percent. Lufthansa and Air France-KLM also traded lower.
O'Leary told a conference call that Ryanair's sales were experiencing "a perceptible dip" for the September-November period amid stronger competition in key British, Spanish and Scandinavian markets.
He said Ryanair would ground selected winter services, reduce its planned passenger payload from 81.5 million to 81 million — still a record for the ever-expanding airline — and offer steeper discounts on tickets for travelers in Ireland, Britain, Scandinavia and Spain.
He told journalists that Ryanair's weakening sales represented a "marginal" challenge, and was nothing like "collapse or catastrophe."
Since launching a single Ireland-England route in 1985, Ryanair has grown to become the most influential and successful airline in Europe, enjoying solid growth even as its recession-hit industry endured massive losses, business failures and mergers. Ryanair pioneered policies of charging extra for everything from boarding cards to assigned seats, but many of these customer-annoying practices —designed to drive Ryanair cost-efficiency as well as profits — have gradually been adopted by competitors struggling to keep pace.
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