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Ryanair warns on profit as strikes and rising fuel prices take toll

October 1, 2018 at 12:04pm
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Ryanair cut its forecast for full-year profit by 12 percent on Monday and said worse may be to come if recent coordinated strikes across Europe continue to hit traffic and bookings.

Europe’s largest low-cost carrier has struggled with labour relations since it bowed to pressure to recognise trade unions for the first time last December. Industrial unrest has escalated in recent months as it makes slow progress in talks with some unions.

Ryanair shares fell by as much as 10 percent on a warning that also cited higher oil costs and reverberated around the sector, with rivals Easyjet, Air France KLM and Lufthansa falling by 1.5-3 percent.

The Irish airline now expects profit for the year, excluding start up losses in Laudamotion, to come in at 1.10-1.20 billion euros ($2.66 billion), compared with its prior forecast of 1.25-1.35 billion euros.

It added that it could not rule out further disruption in the coming months, which may require full-year forecasts to be lowered again and further cuts to its loss-making winter capacity.

While Ryanair said it was able to manage initial smaller strikes, two coordinated walkouts since August in Portugal, Germany, Spain, Belgium and the Netherlands hit passenger numbers, last minute bookings, yields and forward air fares.

It said progress in reaching collective labour agreements with staff in other major markets of Ireland, Britain and Italy have not been repeated in the five other EU countries due to what it called “interference” in negotiations.

“Customer confidence, forward bookings and Q3 fares have been affected, most notably over the October school mid-terms and Christmas in those five countries,” Ryanair chief Michael O’Leary said in a statement.

Goodbody Stockbrokers analyst Mark Simpson said the warning came as a surprise given that O’Leary had said there was no change to guidance just two weeks ago.

Ryanair said fares in its second quarter to end-September had fallen by around 3 percent from a 1 percent dip forecast previously, and said that it now expects fares in the second half to fall 2 percent.

Ryanair said last week that the strikes were damaging business just as oil prices rose strongly and said on Monday that its unhedged fuel costs have jumped as oil prices rise to $82 a barrel, hitting 10 percent of its volumes and the entire fuel bill of Austria’s Laudamotion, which it agreed to buy this year.

To cope with the lower fares, higher oil prices and strike costs, Ryanair has trimmed its winter capacity by 1 percent, removing aircraft from its Eindhoven, Bremen and Niederrhein bases which will result in some more flight cancellations.

It said it would seek to minimise job losses by offering pilots vacancies at other bases and exploring unpaid leave and other options for cabin crew.

Shares in Ryanair were 8.4 percent lower at 12.03 euros by 0840 GMT, their lowest level in almost two years, having fallen 27 percent since the industrial action ramped up in mid-July.