Ryanair Q3 profit drops, outlook cautious

Budget airline Ryanair reported a drop in third-quarter profit on Monday as it sounded a cautious note on the outlook for 2017.

In the three months to the end of December, net profit fell 8% to €94.7m as total operating revenues nudged up just 1% to €1.35bn. Analysts had been expecting profit of €99m.

Average fares fell by 17% to just €33 per passenger, while traffic grew 16% to 29m customers and unit costs were cut by 12%.

Ryanair said its outlook for the rest of this year is cautious. With less than two months of the year to go and no Easter in March, it expects fourth-quarter yields to drop by as much as 15%. The airline said it expects to carry over 119m customers in full-year 2017 and for ex-fuel unit costs to fall by approximately 4%.

As a result, it maintained its full-year profit guidance in a range of €1.30bn to €1.35bn, but said this is heavily dependent on the absence of any unforeseen security events affecting close in bookings.

Chief executive officer Michael O’Leary said: “As previously guided, our fares this winter have fallen sharply as Ryanair continues to grow traffic and load factors strongly in many European markets. These falling yields were exacerbated by the sharp decline in sterling following the Brexit vote. Ryanair responded to this weaker environment by continuing to improve our ‘Always Getting Better’ customer experience, cutting costs, and stimulating demand through lower fares which has seen load factors jump to record levels.”

Neil Wilson, senior market analyst at ETX Capital, said: "Ryanair’s trouble is that it has huge exposure to the UK market and sterling, but earnings are booked in euros. The airline derives about a quarter of its earnings in pounds so the collapse in sterling explains a good deal of the fall in profits. But its approach to the challenge has also contributed to the decline in profitability in the third quarter.

"The company’s response to the drop in the pound – to aggressively lower fares to grab market share while expanding routes – doesn’t help profits in the near term. But going forward the growth in traffic will help put it on a surer footing, particularly as it’s also reducing costs."

At 1100 GMT, the shares were down 2.1% to €14.46