Ryanair on the 'pessimistic side of cautious' as it cuts profit guidance

Lynette PayneMay 22, 2018

Despite the disruption caused by its pilot crisis last autumn, City analysts believe that the budget airline will post statutory pre-tax profits of 1.6 billion euro (£1.4billion) for the 12 months to March 31, a 9.4 per cent increase on the corresponding period past year.

It warned they included a potential €400m rise in fuel bills as oil prices continue to climb despite it being 90% hedged. While the prospect of 380,000 dwellings coming up for sale might be music to some ears, they pointed out that it would also mean a big reduction in available private rentals.

Profits have jumped 10pc at Ryanair for the last 12 months to March.

"We will continue to deal openly and fairly with our people and their unions, but we will not make concessions on pay or productivity which threatens either our low-priced model or our cost leadership in Europe", O'Leary said.

O'Leary does, however, reveal that air fares should remain flat over the next 12 months as it takes a full year for the rising price of fuel to translate to fare prices.

"What we've heard in these results is a move towards pay increases", she said.

Ryanair-passenger-forecast-2018
Ryanair expects to see 200m passengers by FY24

"After a strong 2018, with profits +10%, the worse outlook is being pinned on rising staff costs, now that it is recognising unions, and falling air fares amid fierce price competition, both likely to eat into 2019 profits", Artjom Hatsaturjants, an analyst with Accendo Markets wrote in an email Monday.

However, the expectations for the current Fiscal Year (April 2018- March 2019) are "on the pessimistic side of cautious" according to Michael O'Leary's last statement. The discount giant has purchased a 24.9 percent stake which it wants to increase to 75 percent, subject to European Union antitrust approval.

"LaudaMotion has a valuable portfolio of slots at many congested airports in Germany, Vienna, and Palma de Mallorca, " he said. "We expect to grow traffic by 7% to 139 million, at flat load factors of 95%", said O'Leary.

According to the results, non-fuel unit costs will rise by up to 6% due to increased staffing costs and business investment.The airline said it expects staff costs to rise by nearly €200m, half of which will be accounted for by higher pay for front line people and half by additional headcount for growth.

At 0755 GMT, Ryanair shares, down 22 percent from an all-time high nine months ago before the first cancellations were announced but up 9 percent from mid-December, were up 1.5 percent at 15.73 euros, having reversed earlier losses.

Ryanair (RYA.I) Chief Executive Michael O'Leary said on Monday he was not expecting strikes or disruptions over its discussions to recognise trade unions but could not rule them out and would face any action down.

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