Ryanair Issues Profit Warning On Heatwave, Adverse Currency

(RTTNews) - Ryanair Holdings Plc. (RYA.L, RYAAY) Wednesday said it expects full year profit to be at the lower end of its net profit guidance, citing a recent weakness in forward yields into the third quarter amid the heatwave in Northern Europe and weaker sterling /euro exchange rates.

In a trading update, the budget airline said while it remains comfortable with its first-half guidance, the weakness in forward yields suggests that there will be no upgrade to full year guidance.

The company now expects the full year profit to be at the lower end of its outlook of 570 million to 600 million euros.

However, if fares and yields continue to weaken over the coming winter there can be no guarantee that the full year profit may not finish at or slightly below the lower end of this range, Ryanair cautioned.

Ryanair's CEO Michael O'Leary said, "As indicated during our Q1 results presentation on July 29, close in late bookings in July had been at weaker than expected yields due primarily to the heatwave in Northern Europe and weaker sterling/euro exchange rates.''

O'Leary added that the close in booking pattern returned to some normality in August, thus ensuring that its first-half guidance for a small increase in profits over the prior year remains unchanged.

Yet, forward fares and yields into September, October and November were affected due to increased price competition and some capacity increases in the UK, Scandinavia, Spanish and Irish markets, in addition to the effect of austerity and weak economic conditions across Europe as well as weaker sterling/euro exchange rates.

Ryanair said it would respond to this lower yield outlook by selectively reducing its winter season capacity, thus cutting its full year traffic target from over 81.5 million to just under 81 million. The airline will also offer a range of lower fares and aggressive seat sales, especially in UK, Scandinavia, Spain and Ireland.

The airline said it is confident of continuing to hit its revised passenger targets albeit at lower fares and yields than previously expected.

According to the company, even at or slightly below 570 million euros in profit after tax, Ryanair's cash flows and balance sheet remain in good health.

There is no change to the recently announced plans to complete share buybacks of at least 400 million euros and up to 600 million euros through a combination of dividends and/or buybacks in fiscal March 2015, Ryanair added.

RYA.L plunged 13.9 percent in early morning trading at 5.85 euros.