Ryanair warns of first profit fall in five years

The Dublin-based carrier, which flies to nearly 30 destinations from Leeds Bradford, cut its profit forecast for the year to March 31 to around 510 million euros (£431.5m) from 570 million euros. A year earlier, it achieved 569m euros.

Yesterday’s update came two months after the firm made its first profit warning in a decade.

Ryanair expects a nine per cent drop in average fares for the current quarter and a possible decline of 10 per cent in the three months after Christmas.

The airline said that fares had been falling because of “increased price competition, softer economic conditions in Europe and the weaker euro-sterling exchange rate”. Ryanair’s profit warnings follow a string of customer service improvements announced in September to win customers from rivals.

Yesterday, the airline said it will move to fully allocated seating on all Ryanair flights from February. Passengers who do not pay five euros (£4.23) to select their seats will be allocated them during the 24 hours before the date of departure. It said the policy was in response to customer feedback.

But management said the changes, which included a halving of some baggage charges, would not have a significant impact on the current financial year. “These things aren’t instant” said chief financial officer Howard Millar, who forecast it could take 12 to 18 months for the changes to make an impact.

Mr Millar said passenger numbers were stable and on-board spending was growing, but that people were only booking discount fares, a sign Europe may not be recovering as quickly as many people hoped.

“At the macro level in Europe signals have gone green, but on the micro level things don’t seem to be as strong as people think,” he said. Several competitors, including Norwegian and Aer Lingus have also warned of strong competition pushing down prices.

While easyJet last week nudged up its pre-tax profit for the 12 months to September, it has not yet released figures for the October to March period where Ryanair is seeing weakness.

“This is a weak and disappointing profitability guidance from Ryanair indicating that the airline is experiencing a more difficult operating environment than several of its peers,” said David Holohan, an analyst with Merrion Stockbrokers.

Analysts at Panmure retained its ‘buy’ recommendation for Ryanair shares on a 12-month view, but said they expect short-term share price weakness.

Last night, Ryanair’s shares closed down XX per cent at XX.

Ryanair’s profit warning for the year came as the airline met analysts’ forecasts with a profit of 602 million euros for six months to September, up one per cent on the year.

A fall of two per cent in average fares was compensated by a 22 per cent rise in extra revenues to 713m from areas such as the roll-out of reserved seating, priority boarding and higher credit debit card fees.

At Ryanair’s annual general meeting in September, chief executive Michael O’Leary was faced with complaints by shareholders about the impact of customer service on sales.

He said: “We should try to eliminate things that unnecessarily brass people off.”

Mr O’Leary said the company would overhaul its website, set up a new team to respond to emails and stop fining customers whose carry-on baggage exceeds minimum sizes by a matter of millimetres.

Shareholders complained that the company’s reputation for poor customer service was limiting its room for growth.

“I have seen people crying at boarding gates,” said private shareholder Owen O’Reilly.

“There is simply something wrong there that needs to be addressed.”

Ryanair flies from Leeds Bradford to a wide range of winter and summer sun holiday destina-tions.

It has based a third aircraft at Leeds Bradford airport and added six new routes from Leeds Bradford to Chania (Crete), Corfu, Dinard, Kos, Milan (Bergamo) and Tenerife and extended its Kaunas and Riga routes to its summer schedule