Today’s results from Ryanair (RYA) are good news if you’re a passenger with the airline.

The company says it expects fares, which have already fallen over the past year, to go even lower over the course of this year and into next year. It also adds that it doesn’t have much of an idea when they will increase again.

Which is great if you’re planning a quick getaway to somewhere in Europe. But it the tone of today's comments will do little to reassure Ryanair shareholders.

READ MORE ABOUT RYANAIR HERE

The airline has blamed lower fares - as well as Brexit, the oil price, and excess capacity - for the 29% drop in profit after tax to €1.02bn in its full-year results to 31 March.

ONGOING SQUEEZE

The news has caused the company’s share price to fall 5.5% to €10.18 in mid-morning trading, mostly due to its profit being at the lower end of the guidance it gave in January, as well as its cloudy outlook for its current financial year.

Ryanair expects profit to fall further this year to between €750m to €950m, and its fuel bill to rise by €460m. It also expects costs excluding fuel to rise by 2%.

AJ Bell investment director Russ Mould says that while Ryanair does its best to keep costs under control, it is notable that costs are steadily on the up given how it has built its success on very tight control of the purse strings.

Broker Davy Research believes a nadir point has likely been reached for Ryanair, and has lowered its forecast for the airline’s profit this year by 9% to €890m.

Despite the dark clouds which are continuing to surround Ryanair shares in recent years, especially given the fact anyone owning Ryanair’s shares over the last three years would have lost over 10% based on total return figures, not everyone is so gloomy on their outlook for the airline.

SILVER LINING

Canaccord Genuity analyst Gert Zonneveld believes Ryanair’s longer-term outlook remains attractive, given the low cost base it has - something it is able to keep a lid on - as well as the ‘wide range of growth opportunities’ it has at primary and other airports.

Zonneveld also points out the airline is ‘highly profitable’ with ‘enviously high’ double-digit net margins.

Indeed Mould adds that the silver lining to the thick cloud above the firm is the fact its peer group is also facing the same pressures, some of which have balance sheets a lot less secure than Ryanair’s.

EasyJet (EZJ) last week reported a heavy loss in the six months to 31 March, while tour operators Thomas Cook (TCG) and Tui (TUI) have also struggled extensively, with the airline divisions of both causing big problems.

Mould says, ‘Over time this could help relieve some of the competitive pressure and may even present opportunities for acquisitions.’

Find out how to deal online from £1.50 in a SIPP, ISA or Dealing account. AJBell logo

Issue Date: 20 May 2019