Irish stockbroker predicts difficult winter for airlines
12.06.08
Irish Stockbroker NCB is expecting a raft of profit warnings from Irish and UK airlines this winter following recent guidance from the aviaition industry which ‘may prove overly optimistic’, the Irish Independent reports.
Ryanair surprised the market last week when it predicted a 5% rise in fares over the next year, putting the airline at breakeven, even with oil at $130 and minimal hedging. Analysts had been expecting a fall in fares over the year, reflecting weaker demand in its key parkets, plunging the airline into an operating loss.
Rival Irish airline Aer Lingus last week guided a breakeven result for 2008 assuming an oil price in the ‘mid-$120s’ even though oil continues to hover stubbornly at the $135 mark.
However, NCB's Neil Glynn said: 'We feel that current airline revenue guidance may prove optimistic, and see the risk of profit warnings as we enter the winter season. Our view [is] that the airline sector may see significant revenue weakness this winter.'
NCB ‘seeks risk’ on Ryanair's guidance and speculating on a profit warning as early as first quarter results, in late July. However, a weak 2009 will be a ‘blip year’ for Ryanair, with recovery likely once the market restructures and capacity is constrained.
British Airways has the ‘highest short term risk profile’ because of its ‘reliance on premium traffic growth,’ according to NCB.
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