Is Ryanair crying wolf again?
Another impressive set of full-year results from budget air carrier Ryanair, another warning from Chief Executive Michael O'Leary. But could this be the first time his downplayed expectations prove accurate?
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.
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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.
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