Passengers thinking of booking flights with budget airline Ryanair (RYA) have been deterred despite lower fares because of threats over strike action by staff. This has forced the company to cut profit guidance for the full year to 31 March 2019 by 12%.
‘We now guide full year 2019 profit after tax in a new range of €1.10bn to €1.20bn,’ todayu's announcement states. The equivalent range had been previously pitched at €1.25bn to €1.35bn.
The news spooked investors into a wave of share selling, sending the stock slumping more than 9% to €11.92 compounding a three month decline of more than 25% since July.
MIGHT INDUSTRIAL ACTION SPREAD?
Investors are clearly worried that strikes by airline staff could spread across the industry. That explains why other airline stocks are also under pressure on Monday. EasyJet (EZJ) is down 3% at £12.745, British Airways-owner International Consolidated Airlines (IAG) is 1.3% lower at 651.4p, while Wizz Air (WIZZ) fell 52.5% to £28.04.
Two days of pilot and cabin crew strikes caused havoc in Germany, Holland, Belgium, Spain and Portugal, resulting in lower traffic and a 3% drop in fares, down from an expected 1% rise.
The strikes are deterring passengers from flying with Ryanair over the October school holidays and Christmas period with fares forecast to fall 2% in the second half of the year.
A surge in the oil price to approximately $82 per barrel, affecting 10% of Ryanair’s volumes, and re-accommodation costs are also making an impact.
The airline has decided to trim capacity over winter by 1% on a surplus of cabin crew, closing a base in the Netherlands, while reducing capacity and closing a base in Germany.
AJ Bell investment director Russ Mould says Ryanair’s stark warning is unusual as the company does not rule out any further downgrades.
