Ryanair CEO ‘Very Cautious’ on Profit Forecast as Fares Fall

Updated on
  • Winter price drop of 10%-12% would prompt review of outlook
  • Spending cuts helped offset fare drops so far, O’Leary says

Ryanair Holdings Plc warned it won’t be able to cut spending fast enough if a drop in ticket prices accelerates this winter, reflecting the strain facing European airlines as terrorist attacks and volatility stemming from Brexit spook travelers.

The carrier, Europe’s largest discount airline, has been able to offset price declines during the summer season with cost cuts, while it’s also been filling more available seating, Chief Executive Officer Michael O’Leary told reporters Wednesday in London. Even so, there’s not much the airline can do in terms of lower spending or increasing non-ticket revenue if fare declines continue to intensify, he said.

Michael O’Leary on Aug. 31.

Photographer: Chris Ratcliffe/Bloomberg

“We’re not yet revising the guidance,” O’Leary said. “But we’re very cautious on the full-year guidance. If winter fares fall by more than 10 or 12 percent, we will have to review.”

European airlines have been scaling back earnings expectations in recent weeks as demand waned following terrorist attacks across the region as well as the British referendum in June to exit the European Union. Ryanair said last week that it’s seeing fares in its core summer period fall by 9 percent, sharper than the 6 percent to 8 percent slide expected at the start of the budget airline’s fiscal year in April.

Ryanair shares fell as much as 2.5 percent and were down 1.8 percent at 11.97 euros as of 12:29 p.m. in Dublin.

The airline’s current forecast is for net income for the 12 months through March 2017 to rise to within a range of 1.38 billion euros ($1.54 billion) and 1.43 billion euros from 1.24 billion euros in fiscal 2016.

The scope of further fare cuts may be limited. Pricing late last year was already low as the carrier tried to win back customers deterred from traveling by terrorist attacks in Paris, O’Leary said.