Ryanair warns against profits as strikes and rising gas prices wreak havoc

DUBLIN (Reuters) – Ryanair (RYA.I) reduced its annual profit forecast by 12% on Monday and said the worst could come if recent coordinated strikes across Europe continue to affect traffic and bookings.

The biggest low-cost airline in Europe has had difficulties with labor relations because it was forced to recognize the unions for the first time last December. Industrial unrest has intensified in recent months as negotiations with some unions progress slowly.

Ryanair's shares, which also takes into account the stubbornly high price of fuel, fell by 10% and the warning sounded in the sector, with rivals Lufthansa (LHAG.DE), Air France KLM (AIRF.PA) and easyJet (EZJ.L) down from 0.5 to 3.3%.

The Irish airline now expects the profit for the year, excluding start-up losses of Laudamotion, to amount to 1.10-1.20 billion euros (2.66 billion dollars), against an earlier forecast of $ 1.25 to $ 1.3 billion.

This would represent a drop of 17 to 24% compared to the record profit of 1.45 billion euros after tax recorded at 31 March.

It added that it could not exclude further disturbances, which could require a further decline in the forecast for the year and further reductions in its winter deficit capacity.

While Ryanair claimed to be able to handle smaller initial strikes, two walkouts coordinated since August in Portugal, Germany, Spain, Belgium and the Netherlands affected the number of passengers, last minute bookings, yields and airfares.

These strikes, which also extended to some staff members in Sweden and Italy, disrupted the projects of more than 100,000 clients.

Citing a call management held with analysts Monday, Barclays said Ryanair was working to resolve all union agreements in the next 3-5 months.

Ryanair departs after the profit warning – reut.rs/2ItN1lZ

CUSTOMER TRUST DENTED

Ryanair said the progress made in concluding collective agreements working with staff from other major markets of Ireland, Britain and Italy have not have been repeated in the other five EU countries.

"Customer confidence, advance bookings and third quarter rates have been affected, including mid-term in October and Christmas in these five countries," said Michael O'Leary, head of Ryanair, in a statement.

Goodbody Stockbrokers analyst Mark Simpson said the warning was a surprise since O'Leary said there had been no change in management two weeks ago.

Bernstein analysts said the reduction was the latest indication that reporting on low-cost wins and bequeath losses could end after rival easyJet announced a cautious outlook for next year. , despite the fallout from Ryanair.

Ryanair said its second-quarter rates at the end of September were down about 3 percent from the previously forecast 1 percent drop, and said it now expects a 2 percent drop in rates in the second half of the year.

Ryanair warned last week that strikes had hurt the market as oil prices rose sharply. She announced Monday that her uncovered fuel costs had soared to 82% per barrel, reaching 10% of volumes for the current fiscal year and all of the fuel. Laudamotion's bill from Austria, which he agreed to buy this year.

In an analysis last week, Goodbody said that Ryanair was more exposed than its closest rival, as in July, it covered 19% of the capital at 690 USD / MT for the year until the end of the year. In March 2020, while easyJet covered 61% at 560 USD / MT. for his fiscal year until September 2019.

Goodbody therefore estimated that a 1% increase in the price of jet fuel would reduce Ryanair's forecast for 2020 by 3.5%, but by only 2% of EasyJet before any adjustment of capacity growth or prices.

To cope with lower prices, higher oil prices and the costs of the strike, Ryanair reduced its winter capacity by 1%, removing planes from its bases in Eindhoven, Bremen and Niederrhein. which will result in further flight cancellations.

He stated that he would seek to minimize job losses by offering vacancies to pilots and exploring unpaid leave and other options for cabin crew.

Ryanair's shares were down 8.9% to 11.94 euros at 11:32 GMT, their lowest level in nearly two years, after a 27% decline since the outbreak of industrial action at the time. mid-July.