DUBLIN: Ryanair Holdings PLC forecast that earnings growth would slow this year as a spate of terror attacks and lower fuel prices prompt airlines to cut ticket prices.
Europe’s largest discount carrier expects net profit to rise about 13 percent in the year through March after a 43 percent surge in the previous fiscal year, the Dublin-based company said yesterday in a statement.
Ticket prices are due to fall 7 percent in fiscal 2017, with the pace of the declines accelerating in the winter travel season, Ryanair said.
“We are, I think, rightly cautious as we head into the new year,” chief financial officer Neil Sorahan said in a telephone interview.
Amid the recent terror attacks in Brussels and cancelations due to air traffic control strikes in France, “we, along with our hedged competitors, are starting to see our fuel bills coming down; we believe some of this will be passed onto passengers, probably quite a good bit,” he added.
Profit after tax in the current fiscal year, excluding the sale of its stake in Irish carrier Aer Lingus, surged to 1.24 billion euros (US$1.39 billion) from 867 million euros a year earlier. That slightly lagged the 1.29 billion euro average of 16 analyst estimates compiled by Bloomberg.
Earnings this year are projected to a range from 1.375 billion euros to 1.425 billion euros, Ryanair said.
European airlines, including IAG SA’s British Airways and Deutsche Lufthansa AG, are facing a tough summer of low fares and reining in capacity growth after the shootings in Paris in November last year and bombings in Brussels in March. Ryanair has adjusted its strategy in the past year, targeting primary airports in cities it serves to compete more directly with larger mainline carriers and archrival EasyJet PLC.
Amid “very limited visibility,” Ryanair said fares would fall between 5 percent and 7 percent in the period through September. Fares would decline between 10 percent and 12 percent in the second half of its fiscal year.
Ryanair yesterday said that ticket prices were down 7 percent in the fourth quarter, steeper than an earlier forecast for a 6 percent drop.
Fares could fall further in the first quarter following the disappearance of an EgyptAir flight on Thursday last week, depending on the outcome, Sorahan said. A series of air traffic control strikes across France, Germany and Italy have already impacted operations this year, canceling 200 flights so far.
CEO Michael O’Leary last month said the terror attacks in Europe, combined with a run of air traffic strikes in France, probably reduced full-year earnings by 30 million euros to 40 million euros.
The downing of a Russian airliner in Egypt and terrorism attacks in Turkey and Tunisia over the past year have prompted airlines to shift capacity away from those destinations, contributing to depressed fares.
Ryanair plans to increase traffic 9 percent to 116 million passengers in the next fiscal year.
The company expects its airplanes to fly at 93 percent capacity, the same rate as the previous year.
Fuel savings would contribute about 200 million euros in reduced costs, as the airline’s fuel hedging falls to US$62 per barrel from last year’s US$90.
The carrier is 95 percent hedged next year and 44 percent hedged for fiscal 2018 at US$50 per barrel.
