Investors were clearly expecting the worst from budget airline Ryanair (RYA) following a profit warning in early October.
Then, Ryanair slashed profit guidance by 12% for the year to 31 March to €1.1bn to €1.2bn, down from €1.25bn to €1.35bn.
The news spooked investors and prompted shares in the airline to hit near two-year lows.
Ryanair is struggling to bounce back from this hit, managing a modest 4.4% advance for the shares to €11.95 on today’s results which at least suggesting things had not got any worse for now.
Investors should keep the champagne on ice as a fresh warning could emerge if fares continue to fall, oil prices rise and workers strike more.
‘WORST YEAR’ FOR STRIKES
2018 has been the ‘worst year on record’ for strike disruption and staff shortages in Europe according to Ryanair.
The impact is dragging on the company’s performance with profit falling 7% to €1.2bn and a 3% cut in average fares to under €46.
Ryanair is still attracting customers with sales rising 8% to €4.79bn, but it needs to get more bums on seats to offset cut-throat pricing from an airline that is struggling with widespread disruption.
A drop in punctuality from 86% in the six months to September 2017 to 75% is unlikely to help as it could encourage passengers to pay more elsewhere for a more reliable service.
COLLAPSING RIVALS
Ryanair says the collapse of small European airlines, including Primera Air and Skyworks, could fuel growth for the airline.
AJ Bell investment director Russ Mould says: 'If you drill down into the latest numbers, it is the little things that count. For example, there has been an improved uptake of reserved seating and priority boarding.
'Ryanair has always been very good at driving up so-called ancillary revenues and shareholders will be pleased this trend remains intact. These little positives are welcome, yet it is worth noting that Ryanair’s profits aren’t expected to start growing again until the financial year ending March 2020.
'From an investment perspective, anyone owning Ryanair’s shares over the last three years would have lost 11% based on total return figures, which includes capital gains or losses plus dividends reinvested.
'On the same basis, EasyJet (EZJ) is down 27% and the worst performer among the London-listed stocks is Flybe (FLYB), down 81%. The best performing airline share on a total return basis is Jet2-owner Dart (DTG), up 85% over the past three years. Wizz Air (WIZZ) is second best, up 38%; and British Airways-owner International Consolidated Airlines (IAG) is up 8% over the same period.'
