Ryanair shares nosedive as it reveals it may miss profit targets

The budget airline has said end of year profits may miss forecasts

by Gabriella Griffith
Last Updated: 25 Oct 2013
Ryanair’s share price tumbled by as much as 13% this morning after it revealed it expects its full-year net profit to be at the bottom end of forecasts, which had guided between €570m and €600m.
Outspoken chief executive Michael O’Leary has put the reduction down to increased competition and austerity measure in the eurozone.   
‘In recent weeks we have noticed a perceptible dip in forward fares and yields into September, October and November, which is we believe due to a combination of factors,’ said O’Leary. (Note how O’Leary abandons his usual high-octane delivery in return for management speak when he delivers bad news.)
‘Increased price competition and some capacity increases in the UK, Scandinavian, Spanish and Irish markets, the continuing effect of austerity and weak economic conditions across Europe and weaker sterling/euro exchange rates.’
The bosses at rival airlines won’t be thanking O’Leary for his announcement this morning, as it has had a domino effect on the shares of easyJet (down 7.1%) and British Airways owner IAG (down 4.2%).
With Ryanair’s customers not booking in their usual droves, O’Leary has vowed to tackle the problem by cutting its capacity for the year to 81 million seats from 81.5 million and by introducing ‘aggressive seat sales’ in the UK, Scandinavia. Spain and Ireland. Ryanair’s modus operandi is shouty at the best of times so goodness only knows what he could do to ramp-up his ‘aggression'.
The announcement from the cobalt-winged airline has come as a bolt from the blue to analysts, who expected better from the usually strong performing airline.
‘This is a surprise statement from Ryanair and comes contrary to some of the commentary from the peer group and indeed Ryanair's own commentary at its June investor days,’ said Donal O'Neill, analyst with Goodbody stockbrokers.
No doubt with O’Leary citing increased competition as one of Ryanair’s headaches, he’ll use this to take another swipe at the UK Competition Commission, which recently ruled Ryanair must sell-off most of its stake in rival Aer Lingus. Anything to get back on his soap box…

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