* CEO warns pilots of job losses
* Says to meet annual profit target despite strikes
* Q1 Profit falls 20 pct y/y but ahead of consensus
* Hot weather, strikes push down average fares
(Updates share price, adds analyst quote)
By Conor Humphries
DUBLIN, July 23 (Reuters) – Ryanair warned investors
of more strikes and weaker ticket prices this summer, pushing
its shares down sharply, as it heads into the worst week of
stoppages it has faced in more than three decades of flying.
Shares in the Irish airline, the largest in Europe by
passenger numbers, plunged 4.7 percent to 14.82 euros by 0855
GMT, after briefly matching a 12-month intraday low hit in
December when the airline shocked markets by recognising unions.
Ryanair said it was on course to hit its annual profit
target despite the disruption but fraught relations with staff
and pressure on fares took their toll.
Over 300 of Ryanair’s 2,400 daily flights are to be
cancelled on Wednesday and Thursday due to strike action by
cabin crew in Spain, Portugal, Italy and Belgium.
Chief Executive Michael O’Leary said he expected more
strikes during the summer “as we are not prepared to concede to
unreasonable demands that will compromise either our low fares
or our highly efficient model.
He also warned staff of possible job losses if strikes went
“If these unnecessary strikes continue to damage customer
confidence and forward prices/yields in certain country markets
then we will have to review our winter schedule, which may lead
to fleet reductions at disrupted bases and job losses,” he said.
Ryanair shares are almost 25 percent below an all-time high
of 19.38 euros hit last August, before a rostering problem
forced the airline to cancel 20,000 flights.
In the aftermath of those cancellations, Ryanair narrowly
averted widespread strikes before Christmas by deciding to
recognise trade unions for the first time in its 32-year
history. But it has since struggled to reach agreement on terms
with several of them.
Pilots are demanding more transparent systems for promotions
and transfers to reduce what they say is excessive management
discretion over their careers, while cabin crew want local
contracts and better conditions.
Ryanair, which flies in 37 countries and carried 130 million
passengers last year, says its staff have some of the best
conditions in the low-cost sector.
In financial results for the three months to June 30,
Ryanair saw profit fall 20 percent from the same period last
year on higher staff and fuel costs, and weaker fares.
But its profit of 319 million euros ($374.4 million) was
ahead of the average estimate in a company poll of analysts of
305 million euros.
The results come after EasyJet, Europe’s
second-biggest low-cost airline, raised its profit guidance,
forecasting earnings could soar by as much as 45 percent this
year. Fast-growing budget airline Norwegian Air
Shuttle earlier in July also beat expectations with a
second-quarter net profit.
“MODEL NOT BROKEN”
Revenues for optional extras like pre-assigned seating and
priority boarding grew 25 percent in the quarter, helping to
offset a fall of 4 percent in average fares.
It cited strikes as one of the reasons why average fares
would be lower than expected this summer, with high competition
and a heatwave in Northern Europe also weighing.
Average fares are expected to grow by 1 percent in the three
months to September 30, down from an earlier forecast of 5
percent growth, O’Leary said.
In a pre-recorded presentation to investors, O’Leary said
market expectations for average fares in winter were “overdone”
and expected fares in the period to be flat compared to last
But he reaffirmed its forecast for profit for the year to be
between 1.25 billion euros and 1.35 billion euros, down from a
record 1.45 billion in the year to March 31.
“While Ryanair continues to face some tough issues,
fundamentally the model is not broken, and we see this period of
weakness as a buying opportunity for investors with a
medium-term investment horizon,” Goodbody analyst Mark Simpson
said in a note.
Ryanair also warned that Austrian holiday airline
Laudamotion, which it agreed to buy this year, would post annual
losses of 150 million euros ($176 million), up from an earlier
estimate of 100 million.
($1 = 0.8522 euros)
(Reporting by Conor Humphries
Editing by Gopakumar Warrier/Keith Weir)