Ryanair profit warning . " Aircraft disposals "
Ryanair warns of perfect storm
Shares in Ryanair crashed 13.5% in early morning trade in Dublin after it reported a 27% drop in third quarter net profits. The airline warned that poor market conditions meant profits may fall in its next fiscal year.
Ryanair said its underlying net profit in the three months to end December fell by 27% to 35m from 48m the same time the previous year as average winter fares fell almost 5%.
The net profit figure excludes a one-off gain of 12.1m from the sale of five Boeing 737-800 aircraft.
With oil prices at $90 a barrel and fear of recession in the UK and many other European economies, the current outlook for the coming fiscal year is poor,' Ryanair said. 'There is now a significant chance that profits may decline next year,' it added. Ryanair said its passenger traffic grew by 21% to 12.4 million in the three month period, while revenues rose by 15% to 569m. Yields fell by 4%. The airline's ancillary revenues grew by 30%
Ancillary penetration continues to increase, and we are on target to achieve our ancillary sales objective of 20% of revenues over the next three years,' commented Ryanair's CEO Michael O'Leary. Ryanair repeated its guidance of net profit growth of 17.5% to approximately 470m for the full fiscal year 2007-2008.
'At this time it is too early to make any accurate forecasts in such volatile markets for 2008/2009,' Mr O'Leary said. 'However, with oil prices at $90 a barrel and fears of recession in the UK and many other European economies, the current outlook for the year is poor'.
He said that the airline remains essentially unhedged for next year. The airline's CEO says that current oil prices will impose significantly higher costs during a year when it expands capacity by almost 20%.
The airline's earnings may also be impacted by the recent weakness of sterling, which accounts for a significant proportion of Ryanair's revenues,' Mr O'Leary stated.
'The European airline sector is presently facing one of these cyclical downturns, with the possibility of a 'perfect storm' of higher oil prices, poor consumer demand, weaker sterling and higher costs at unchecked monopoly airports,' the Ryanair boss said.
'While it is impossible to accurately forecast full year fuel prices and yields this far in advance, there is now a significant chance that profits may decline next year,' Mr O'Leary cautioned.
'At our most optimistic, a combination of flat yields and $75 oil would see profits grow by 6% to approximately 500m, but at our most conservative, if forward oil prices remain at $85, and consumer sentiment/sterling weakness leads to a 5% reduction in yields, then profits in the coming year could fall by as much as 50% to as low as 235m (excluding profits from aircraft disposals),' Mr O'Leary predicted.
He said the airline hopes to provide a more informed update on guidance with the release of full year results in June.
Ryanair also said it planned to spend up to 200m buying back shares which, based on its current share price, would equate to 3% of the company's share capital.
Shares in the airline were down 48 cent to 3.11 in Dublin early this morning - a fall of 13.5%.
When he talks about disposals, does he mean further to the five 738īs he had already sold ?