Ryanair profits down 85%; warns of full year loss
28.07.08
Ryanair warned today that it could make a loss of up to €60 million (£47.4m) in its current financial year due to record fuel prices. It gave the warning as it announced net profits in the 3 months to the end of June had fallen by 85%. Its shares crashed but the airline still insisted it would continue to cut fares, and had no plans to introduce a fuel surcharge.
Ryanair said that profit after tax, before taking into account exceptional costs, slumped to €21 million during the 3 months to June 30 compared to €139 million last year. The airline said that its fuel bill had soared by 93% in the quarter compared to a year earlier. Fuel now represents almost 50% of its operating costs, compared with 36% last year.
Fares are likely to fall by 5% this year as Ryanair 'battles for customers amid plunging confidence', the airline added. Chief Executive Michael O'Leary said: ‘The outlook for the remainder of the fiscal year, which is entirely dependent on fares and fuel prices, remains poor.' In the year to March 2009 he warned the airline could lose up to €60m, compared with a profit of €480.9m in the previous year.
One analyst told the BBC that the results were‘an unmitigated disaster’ which needed an urgent response from management. The airline needed to ‘at least double’ ticket prices and take more planes out of service to cut overheads, Howard Wheeldon of BGC Partners said.
He added that management needed to ‘climb off the high and mighty pedestal’ and ‘get real’ about the implications of the high oil price and its rapid expansion. He said: ‘Although this crisis is not of the airlines own doing, it is potentially so bad that Ryanair will soon be seen as having bitten off more than it can chew.’
But the budget airline said it would look to maintain ‘aggressive pricing’ in order to undercut competitors. Ryanair also said that the recent fall in prices had been used to hedge 90% of its fuel needs for September at $129 per barrel and 80% for the third quarter at $124 per barrel. However it is currently still liable for the full cost of oil in the fourth quarter.
Ryanair's downbeat statements saw its shares fall by as much as 25% today, closing the day down 22%.
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