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Ryanair Shares Drop After Fiscal 2020 Pre-Tax Profit Guided Lower Due to Continuing Pressure on Fares

Shares of Europe’s biggest budget airline Ryanair (RYA.L) traded lower early on Monday after the carrier warned of lower earnings in fiscal 2020 after higher fuel costs and lower fares led to a 29% plunge in pre-tax profit for the year ended March. 

Sales grew to 7.56 billion euros ($8.44 billion) during the 12 months that ended March 31, from 7.15 billion euros a year ago as traffic rose by 7%, the Dublin, Ireland-based group said in a statement. The increase in traffic was due to a 6% drop in fares driven mainly by short-haul capacity growth and the absence of Easter in the fourth quarter. 

Ryanair’s ex-fuel unit costs rose by 5% — better than previously guided 6% — following a 200 million-euro jump in staff costs and a 50 million-euro increase in expenses related to “repeated” Air Traffic Control staff shortage disruptions. The firm, which is 90% hedged for fiscal 2020 at $709 per tonne and 35% hedged for the first quarter of fiscal 2021 at $654, said its oil bill shot up by 440 million euros. 

As a result, Ryanair, which said it has the lowest unit costs of any airline in the European Union, reported a drop in profit before tax to 1.02 billion euros, from 1.45 billion euros a year ago, even as the load factor climbed by 100 basis points to 96%. 

Looking ahead, the group said its outlook for fiscal 2020 was “cautious” due to the pressure on fares, which are expected to push up traffic by 8%. While first-half bookings are slightly ahead of last year, fares are lower and this trend is expected to continue through the rest of this year, which will also see costs rise as fuel bill is set to jump by another 460 million euros, the firm added. 

Ryanair’s pre-tax profit for fiscal 2020 is expected to range from 750 million euros to 950 million euros, down from a year ago, as delays in the delivery of Boeing’s (BA) 737 MAX — an aircraft in which Ryanair has “utmost” confidence but does not see benefits accruing from it before 2021 — will contribute to the increase in group costs excluding fuel. 

Shares of the airline, whose board has approved a 700-million-euro share buyback over the next 9 to 12 months, traded almost 6% lower at the time of writing in London. 

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