Another impressive set of full-year results from Ryanair (ISE: RYA), another warning from chief executive Michael O'Leary. Announcing pre-tax profits up 33% to a record e451m for the year, Ryanair's share price nonetheless slid by 7% as O'Leary warned that profit growth could fall to 5% this year. Average fares rose by 7% and passengers jumped by 22% to 42.5 million in the past year, but yields (revenue per seat) have recently come under pressure amid softening demand. O'Leary puts this down to a range of factors, including higher interest rates and air passenger duty and "swingeing airport charges".
Ryanair results: What the commentators said
Take O'Leary's gloomy forecast with a pinch of salt, one fund manager told The Irish Times. "This time last year, Ryanair swore blind that profit growth would be 5%-10% at best and it might even struggle to make that. As the year progresses, O'Leary is likely to become more upbeat."
Ryanair plans to slash fares, open new routes and start a fare war, thus keeping passenger numbers growing by over 20% this year. And with the lowest costs of any airline in Europe, "18% after-tax margins being the envy of the industry", it should suffer less than its rivals, said Alistair Osborne in The DailyTelegraph.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Ryanair has the best business model and balance sheet in the industry, and its strategy of meeting softer demand with a fare war has worked before, said Lex in the FT. But "industry headwinds are building". The airline faces weakening demand, maturing low-cost markets and aggressive competition, as well as "an unfavourable regulatory regime". This may be the first time O'Leary's downplayed expectations prove accurate.
RYA: e5; 12m change 50%
-
Going part-time could leave a £58,000 hole in your pension: how to plug the gapThere are many reasons for switching to part-time work, but some savers don’t consider the impact on their pension until it is too late
-
Three bargain investment trusts to add to your portfolioThese three investment trusts are bargains compared to their net asset value (NAV), but one fund analyst thinks the deep discounts are unwarranted.
