Brexit impact sees Ryanair lower profit forecast

Ryanair, the Republic of Ireland-based low-cost carrier has lowered its profit forecast for the financial year 2016-2017 by 5% as a result of the continued impact of the UK’s decision to leave Europe. While the Republic of Ireland will remain in Europe, 26% of its income is in UK pounds sterling, a currency which has seen its value fall 18% since the Brexit vote.
The low-cost carrier (LCC) has reduced its 2016-17 full-year net-profit guidance to €1.3-€1.35 billion (US$1.43-$1.48 billion), which is approximately 5% lower previously forecast estimates. Original net profit figures for 2016-2017 were expected to be €1.4-€1.5 billion US$1.54 -US$1.65 billion), an increase of 12% on the previous financial year. Instead, this new forecast sets expected growth nearer to 7%.
According to the Ryanair CEO, Michael O’Leary, “The recent sharp decline in sterling post-Brexit will weaken second-half yields by slightly more than we had originally expected. While higher load factors, stronger traffic growth and better cost control will help to ameliorate these weaker revenues, it is prudent now to adjust full-year guidance.”
The airline also confirmed that “its first-half fares were marginally weaker at -10%, compared to previously guided -9%. However, these lower fares will be partly offset by a better-than-expected cost performance. Ryanair now expects full-year ex-fuel unit costs to decline by 3%, compared to previously guided 1%. Ryanair also expects full-year load factor to be 1% better than guided at 94%, and now expects that full-year traffic will increase to 119 million, which is 12% growth on last year’s 106 million customers.”
This latest forecast came with an element of caution and the codicil that these figures are based on projected second-half fares and there is no further devaluation of the UK pound.