Ryanair today (18 January) lowered its full year profit guidance from a current range of €1.1-1.2 billion to a new range of €1.0-1.1 billion mainly due to lower wninter fare.
Ryanair said the reduce guidance was due to lower winter fares, which are expected to fall seven per cent (previous guidance -2 per cent).
However, the Irish LCC said it is forecasting stronger traffic growth, up nine per cent to 142 million (previous guidance of 141 million); stronger ancillary sales as more customers choose lower cost optional services; and slightly better than expected H2 unit cost performance.
This guidance excludes (exceptional) start-up losses in Laudamotion, which it owns a 75 per cent stake in and has been cut from €150 million to €140 million on the back of better than expected unit cost performance during the winter period.
Ryanair’s chief executive officer, 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.”
