Ryanair Holdings PLC joined a chorus of European carriers in warning that a fare war and weakening economies might hold back earnings this year.
Shares of the region’s biggest discount airline yesterday fell the most in six months as it posted a 39 percent drop in net income for the 12 months through March and said profit could tumble further.
European carriers are bracing for a tough summer as a glut of seats combines with stuttering economic growth and high fuel prices to squeeze margins. Market leader Deutsche Lufthansa AG has frozen capacity at its discount arm, while Thomas Cook Group PLC’s share price plummeted last week after analysts said the holiday firm’s debt now exceeds its value amid faltering demand.
Ryanair chief executive officer Michael O’Leary said he was “cautious” on prices this year, with no visibility for the second half, which encompasses the winter season.
Shares of the Dublin-based company declined as much as 6.8 percent, the most since Nov. 15 last year, and were trading 5 percent lower at 10.27 euros in the Irish capital.
Ryanair said that first-half bookings for the peak summer period are higher, but that the earnings outcome would depend on last-minute fares and whether there is any disruption from the UK leaving the EU. The fuel bill is set to swell by 460 million euros (US$513 million), slightly ahead of last year’s increase.
For the year ended March, strong growth in ancillary revenue — such as booked seats and early boarding — was also offset by a 200 million euro jump in staff costs, including a 20 percent pilot pay increase, as Ryanair grappled with a unionization drive across its bases.
Europe’s biggest discount airline aims to take delivery of Boeing Co’s grounded 737 Max jetliner from October once the planemaker returns the model to service after two recent crashes, chief financial officer Neil Sorahan said in an interview.
Five aircraft should be operational for the winter timetable after being scheduled for delivery from last month.
Ryanair forecast net income of 750 million euros to 950 million euros this year after a 39 percent decline to 885 million euros in fiscal 2019.
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