Ryanair Shares Fall on Lower Profits

Budget airline reported a fall in profits for the full year, underlining the current woes of the travel and tourism sector

James Gard 20 May, 2019 | 10:40AM

Ryanair

The recent difficulties of the listed travel sector were laid bare today by budget airline Ryanair (RYA) as it reported a 41% drop in annual pre-tax profits to €948 million. Shares in the London-listed airline, which blamed higher fuel and staff costs for fall, shed more than 5% in early trading.

The company’s shares were trading above €15 a year ago but are now changing hands just above €10.

While passenger numbers are up 7% in the full year, fuel costs were 23% higher and staff costs increased nearly 30% as a result of industrial action that forced the company to pay pilots 20% more. The average fare was down 6% in March compared with the same month a year ago.

The airline’s profit fall was exacerbated by a €139 million euro loss from its acquisition of Austrian carrier Lauda last year.

Ryanair’s share price fall had a knock-on effect on other listed airline stocks such as easyJet (EZJ), which last week appeared to shrug off its first-half loss.

Thomas Cook (TCG) shares, which plunged last week, were under pressure again on Monday morning. The shares crashed 40% on Friday as concerns over the travel group’s viability were flagged up by City analysts.

Ryanair's drop in earnings had been expected after the firm issued a profit warning in January following a fall in fares. The airline’s outlook for this financial year was gloomy and it said that there was “zero visibility” on the second half.

Russ Mould, investment director at AJ Bell said that Ryanair’s peers are “facing exactly the same pressures and many operators have far less secure balance sheets than Ryanair”.

He said: “Over time this could help relieve some of the competitive pressure and may even present opportunities for acquisitions.” Mould cited concerns over rising costs, despite the firm’s well-earned reputation for cost-cutting.

Among Morningstar-rate funds that own stakes in Ryanair, 3.65% of the five-star rated Baillie Gifford European fund is invested in the budget airline.

Ryanair also announced a €700 million share buyback today for the current financial year, higher than the €560 million in the financial year just finished. Including special dividends, this takes shareholder returns to nearly €7 billion.

 

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Baillie Gifford European B Acc2,356.23 GBP1.00
easyJet PLC1,107.50 GBX0.68
Ryanair Holdings PLC10.35 EUR3.67
Thomas Cook Group PLC4.71 GBX-0.04

About Author

James Gard  is content editor for Morningstar.co.uk

Audience Confirmation


By clicking 'accept' I acknowledge that this website uses cookies and other technologies to tailor my experience and understand how I and other visitors use our site. See 'Cookie Consent' for more detail.

  • Other Morningstar Websites