Irish airline Ryanair Holdings surprised investors by maintaining its profit forecast for fiscal 2017, although it warned that its objectives may be under pressure after Britain’s decision to split with the European Union (EU) and the series of terrorist attacks in key European markets, writes Bloomberg.
Although Ryanair has predicted that its net profit for the 12 months to March 2017 will grow to 1.38 to 1.43 billion euros (1.51 to 1.57 billion dollars) the vote for Brexit suggests “significant risks of downturns in the rest of the year,” the company said.
The price of Ryanair’s shares rose by 7.2% – the largest increase since September, 9.
The largest low-cost airline in Europe, which insisted for Britain to remain in the EU will shrink their operations at London Stansted Airport, its largest base, yet this winter. Although Britain is not yet facing cuts of routes, 50 aircraft scheduled for delivery this year will be aimed at other markets to compensate for the expected decline.
The weakening of the pound after the referendum in the UK, combined with the impact of strikes by employees involved in air traffic control, and recent attacks in France and Germany, would lead to a drop in ticket prices in the second quarter. Now the company predicts that the decline in the first half of the year to September will be 8%, compared to 5 to 7% who expected earlier.
From Ryanair announced that until the end of 2017 will be difficult to measure the impact of Brexit. Backup plans include targeting growth in the eastern markets such as Poland, Romania, Lithuania and the Czech Republic as well as in the larger markets such as Italy, Spain, and Germany.
Net profit for the first quarter ended June 30, increased by 4.5% to 256 mln. euros. The 11% jump in passenger numbers helped to cope with the 10% drop in ticket prices, according to a statement from the company.
Prices began to fall even before the decision for Brexit, as lower fuel prices have encouraged companies to add flights in pursuit of greater market share, while tour operators turned the flow to Western European routes from the affected by the terrorist attacks countries such as Egypt, Tunisia, and Turkey.
Attacks in Nice and most recently in Germany will also put pressure on fares for these destinations for the rest of the year.
The decline in ticket prices during the first quarter was overcome by Ryanair thanks to shrinking costs by 4%, while at the same time, the company was able to negotiate better terms with the airports it uses and had lower advertising costs.