Low-cost giant Ryanair remains on track for a record profit this year, it said on Monday, dodging turbulence caused by Britain’s vote to leave the European Union thanks to pre-referendum bookings and high exposure to continental Europe.
While the airline still faces a cocktail of risks from Brexit, which may force it to cut profit forecasts later in the year, Chief Executive Michael O’Leary said he “did not see the evidence to justify a cut” right now.
He said Ryanair still sees profits after tax of between €1.375-billion (1.15 billion pounds) and €1.425-billion (1.19 billion pounds), an increase of 13 per cent on last year.
“I don’t think any other airline in Europe will be delivering or forecasting that kind of profit growth,” he said in a pre-recorded video presentation. “But all of the clouds on the horizon suggest there are significant risks to the downside in the second half of the year.”
Ryanair shares were up 5.5 per cent at 11.5 euros 0815 GMT, a fall of 16 per cent since the Brexit vote.
Rival easyJet PLC last week said it was unable to give an earnings forecast in the aftermath of Brexit, a deadly attack in Nice and an attempted coup in Turkey, while Germany’s Lufthansa warned on profit.
Ryanair said average fares were down 8 per cent in the three months to the end of June, in line with easyJet and only slightly worse than an earlier forecast for a fall of up to 7 per cent.
Ryanair is only dependent on Britain for around a quarter of its revenue, compared to around half for easyJet, and it has a significantly lower cost base.
Ryanair said it had already sold around 75 per cent of its tickets for the three months to the end of September, compared to a rate of 65 per cent reported by easyJet.
Significant sales before June 23, the day of the Brexit referendum, reduced the impact of the fall in sterling on summer bookings, said chief financial officer Neil Sorohan.
To minimise further impact, Ryanair will start to trim capacity from UK airports this winter, although it will not close any routes.
Most of the 50 planes due for delivery next year will be allocated to non-British routes, as Ryanair “pivots growth away from UK airports” due to Brexit, O’Leary said.
Eastern European-focused budget airline Wizz Air last week also reiterated its pre-Brexit profit forecast after announcing plans to shift significant capacity away from the UK market.
Much of the impact of Brexit for airlines operating in Britain depends on the final terms of its separation from the EU, which may not become clear for months or years.
But Ryanair said even in the worst-case scenario where London fails to secure access to the EU single market and Open Skies travel area, the risks to Ryanair would be “not material and will be manageable” while the impact on rivals could be worse.
Ryanair maintained its forecast of a fall in fares of between 10 per cent and 12 per cent in the winter months, compared with a year ago, but lower fares will increase passenger numbers to 117 million from an earlier forecast of 116 million.
“Always in a downturn we would expect to see lower pricing, but we maintain demand,” O’Leary said.
The Globe And Mail