This morning Ryanair cuts full year profits guidance (ex-Lauda) to €1-1.1bn (from €1.1-1.2bn), citing Winter fares -7% vs -2% guidance, although higher traffic and better unit costs has helped reduce impact; can’t rule out further cuts (fares or guidance) due to Brexit/Security.
Ryanair’s Michael O’Leary said: “While we are disappointed at this slightly lower full year guidance, the fact that it is the direct result of lower than expected H2 air fares, offset by stronger than expected traffic growth, a better than expected performance on unit cost and ancillary sales is positive for the medium term. There is short haul over capacity in Europe this winter, but Ryanair continues to pursue our price passive/load factor active strategy to the benefit of our customers who are enjoying record lower air fares. We believe this lower fare environment will continue to shake out more loss making competitors, with WOW, Flybe, and reportedly Germania for example, all currently for sale.
Both Ryanair and Lauda will report stronger than expected traffic growth, an improving ancillary revenue performance, and strong unit cost discipline this winter, which helps to defray the impact of these lower than expected winter fares. The fact that we are passing on these benefits, in the form of lower air fares, to customers is good for Ryanair’s traffic growth, good for our business over the medium and long term, and good for market share as evidenced by Norwegian’s recent announcement of its plans to close bases in Rome, Gran Canaria, Tenerife and Palma, where they competed head to head with Ryanair.
“While we have reasonable visibility over forward Q4 bookings, we cannot rule out further cuts to air fares and/or slightly lower full year guidance if there are unexpected Brexit or security developments which adversely impact yields between now and the end of March. As we are in a closed period, we will update shareholders in detail on these developments following our Q3 results release on Mon 4th Feb.”