Ryanair profit down 85%; loss warning
28.07.08
Ryanair has warned it could make a loss of up to €60 million (£47.4m) this year due to record fuel prices. It gave the warning as it announced net profits in the three months to the end of June had fallen by 85% to €21m. However the airline insisted it would continue to cut fares, and had no plans to introduce a fuel surcharge.
Ryanair said that profit after tax, before taking into account exceptional costs, slumped to €21 million during the three months to June 30 compared €139 million with its first quarter of 2007.
Ryanair said that its fuel bill had soared by 93% in the first quarter from a year earlier. Its fuel bill now represents almost 50% of operating costs, compared with 36% last year. However ancillary revenues, from things such as extra baggage charges and credit card booking fees, had risen, the airline said.
Fares are likely to fall by 5% this year as Ryanair 'battles for customers amid plunging confidence', it added. Chief Executive Michael O'Leary said: ‘The outlook for the remainder of the fiscal year, which is entirely dependent on fares and fuel prices, remains poor.' In the year to March 2009 he warned the company could lose up to €60m. This compares with a profit of €480.9m in the previous year.
One analyst told the BBC that Ryanair's results as ‘an unmitigated disaster’ which needed an urgent response from management. The airline needed to ‘at least double’ ticket prices and take more planes out of service to cut overheads, said Howard Wheeldon of BGC Partners.
Management needed to ‘climb off the high and mighty pedestal’ and ‘get real’ about the implications of the high oil price and its rapid expansion, he said: adding: ‘Although this crisis is not of the airlines own doing, or that of its competitors, it is potentially so bad that Ryanair will soon be seen as having bitten off more than it can chew.’
But the budget airline said it would look to maintain ‘aggressive pricing’ in order to undercut competitors - and insisted it would not introduce fuel surcharges.
The airline said that the recent fall in prices had been used to hedge 90% of its fuel needs for September at $129 per barrel and 80% for the third quarter at $124 per barrel. However it was still liable for the full cost of oil in the fourth quarter.
Ryanair's downbeat statements saw its shares fall as much as 23% today, closing the day down 22%.
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