Ryanair dives as weak sales prompt profits alert

Ryanair saw its shares fall heavily today after the no-frills carrier warned its profits could miss its forecasts because of weak autumn ticket sales.

Ryanair's CEO Michael O'Leary. Picture: PA

The Irish airline said it would respond to the worsening outlook by reducing its winter capacity and rolling out “aggressive” promotions in the UK, Ireland, Scandinavia and Spain.

The strategy will cut Ryanair’s annual traffic by about 500,000 to “just under” 81 million passengers, while its annual profits are expected to come in at the lower end of its forecast range of €570 million (£480.6m) to €600m.

However, chief executive Michael O’Leary warned: “If fares and yields continue to weaken over the coming winter, there can be no guarantee that the full-year outturn may not finish at or slightly below the lower end of this range.”

O’Leary blamed the gloomy outlook on the weakening euro, as well as increased competition and tough austerity measures across Europe.

The carrier’s shares tumbled 11.2 per cent to €6.03 after the warning. Joe Rundle, head of trading at ETX Capital, said the airline industry is already feeling the pressure of increased oil prices because of the ongoing tension in the Middle East, and the warning from Ryanair “may be echoed by its peers in the months ahead” if western forces become engaged in a protracted military intervention in Syria.

The last time the Dublin-based group warned that its profits would be at the bottom of a previously guided range was in 2009, while it has not issued a full profit warning since 2004.

Despite today’s profit alert, the airline said its cash flows and balance sheet were in “rude health” and its first-half profits remained on course to show a modest increase over last year’s figure of €596m.

The group also said it would press ahead with plans to buy back at least €400m of shares this year, and return a further €600m to investors next year through a series of share buy-backs and dividends.

Ryanair was last month ordered to slash its stake in fellow Irish carrier Aer Lingus to 5 per cent after the Competition Commission found its 29.8 per cent holding could damage competition on routes between Britain and Ireland.

O’Leary has pledged to appeal against the “bizarre and manifestly wrong” ruling, opening the prospect of a legal tussle that analysts said could last years.

He said the watchdog took no action when British Airways parent company International Airlines Group bought Bmi from Lufthansa last year, and claimed the decision “would appear to be a case of one rule for the UK airlines but an invented set of rules for two Irish airlines”.

Ryanair last month offered to sell its stake in Aer Lingus to any other European airline that made an offer for its rival and secured the backing of 50.1 per cent of shareholders, but analysts said there were “no obvious buyers” for the shares.