Ryanair’s share price fell to a two-year low in early trading today after the airline warned investors that its profits would be 12 per cent lower than expected.
The cut-price airline blamed a string of strikes, falling passenger numbers and rising fuel prices for the downgrade, which sent its shares down by more than 8 per cent to around 12p.
Ryanair pilots and cabin crew took strike action in September, knocking passenger numbers and costing the firm in passenger compensation.
A quarter of Ryanair’s Irish pilots went on strike five times this summer. There were additional strikes by crew and pilots in five EU countries too
The multiple strikes also hit customer’s confidence in the company – fears of being left high and dry has put passengers off making forward bookings for the October school half-term and Christmas.
This came on top of rising oil prices, which drove up Ryanair’s fuel bill.
As a result, the airline said it now expects to generate full-year profits between £978million and £1billion, compared with previous guidance of £1.1billion to 1.2billion.
Ryaniar was also knocked by rising oil prices which has driven up its fuel bill
Michael O’Leary, Ryanair’s straight-talking chief executive said: ‘While we successfully managed five strikes by 25 per cent of our Irish pilots this summer, two recent co-ordinated strikes by cabin crew and pilots across five EU countries has affected passenger numbers (through flight cancellations), close in bookings and yields (as we re-accommodate disrupted passengers), and forward air fares into Q3.
‘While we regret these disruptions, we have on both strike days operated over 90 per cent of our schedule.
‘However, customer confidence, forward bookings and Q3 fares has been affected, most notably over the October school mid-terms and Christmas, in those five countries where unnecessary strikes have been repeated.’
At a meeting with shareholders last month, O’Leary declared his intention to step down from the role within the next five years.
Ryanair argued that the strikes went ahead despite having ‘agreed to meet union demands’ and warned that further staff strikes could force the company to issue future profit warnings.
Russ Mould, investment director at AJ Bell, said the downgrade is a ‘severe blow’ to the airline, but points out that O’Leary is ‘far from apologetic’.
Ryanair boss Michael O’Leary (above) said strike action has impacted passenger numbers
‘There isn’t the usual commentary you would normally expect from someone in his situation, such as ‘we’ll try harder’. Instead, you’ve got the straight-talking boss telling the facts as they are, plus a warning that he can’t rule out a further downgrade to earnings guidance.’
‘The stock market clearly thinks Ryanair’s problems are negative for other parts of the airline sector,’ Mould adds, as EasyJet’s share price fell by nearly 6 per cent on Monday morning and British Airways’ owner is down by 4 per cent.
The airline plans to close its four-aircraft Eindhoven base and its two-aircraft Bremen base, as well as trimming down its five-aircraft Niederrhein base.
‘All affected customers have been contacted by email/SMS this morning and will be re-accommodated on other flights or refunded as they so wish,’ Ryanair said.
‘We will also now consult with our pilots and cabin crew at these three bases to minimise job losses.’