Growing evidence that the downturn is upon us....
From Ryanair this morning... not the most optimistic reading
DUBLIN, Feb 4 (Reuters) - Airline Ryanair <RYA.I> posted a sharper than expected drop in third-quarter net profit on Monday and warned high oil prices, an economic slowdown in the UK and weak sterling meant profits may fall up to 50 percent next year. Europe's biggest low-cost carrier said excluding a one-off gain from the sale of aircraft net profit in the three months to the end of December fell 27 percent to 35 million euros ($52
million) as winter fares fell almost 5 percent.
That was below an average forecast of 41.8 million euros and in line with the lowest estimate in a Reuters poll of 10 analysts. Ryanair stuck to its full-year forecast for a 17.5 percent rise in the year to the end of March. It warned, however, there was a "significant chance" profits would fall in its 2008/2009 business year.
"The European airline sector is presently facing one of these cyclical downturns, with possibility of a "perfect storm" of higher oil prices, poor consumer demand, weaker sterling and higher costs," the airline said in a statement. According to the most optimistic scenario, profit next year
could grow 6 percent to 500 million euros if average ticket prices, or yields, stay flat and oil prices drop to $75 a barrel. "But at our most conservative, if forward oil prices remain at $85, and consumer sentiment/sterling weakness leads to a 5 percent reduction in yields, then profits in the coming year
could fall by as much as 50 percent to as low as 235 million euros (excluding profits from aircraft disposals)," it said. The company also said it planned to spend up to 200 million euros buying back shares which, based on its current share price, would equate to 3 percent of Ryanair's share capital. Ryanair's stock has fallen 18 percent since the start of the year due to fears over the impact of rising energy costs and the company's limited fuel hedging for the year starting April 2008. "We remain essentially unhedged for next year," Ryanair said on Monday.