Dublin: Europe's largest low-cost airline Ryanair failed to wow investors with an upgrade to its full-year earnings forecast yesterday after missing market forecasts for second-quarter net profit.
Shares in the Irish airline dropped over four per cent in early trade after a hefty fuel bill dashed expectations for a 40 per cent increase in quarterly profit, and the increase in full-year guidance, which was expected, failed to compensate.
"There was slight disappointment on the cost side, everything else looked strong. So people were slightly underwhelmed with the second quarter performance," said Edward Keeling, analyst with Dolmen Stockbrokers.
Ryanair said yesterday net profit for the second quarter rose 25 per cent to 313 million euros (Dh1.6 billion). The average forecast of six analysts polled by Reuters was 349 million euros.
Its fuel bill jumped 44 per cent in the first half due to higher prices and increased activity.
By 1035 GMT, Ryanair's stock was 3.73 per cent lower at 3.98 euros, underperforming a flat STOXX Europe 600 Travel & Leisure index.
"Momentum and performance of the company continue to be strong," said Stephen Furlong, analyst at Davy Stockbrokers. "They are reasonably bullish into the winter."
Ryanair said it expected full-year net earnings to rise about 8 per cent from a previous guidance of 350 million to 375 million euros as yields improve on the back of more profitable, longer routes.
The rosier outlook follows raised earnings expectations across the sector with leading flag carriers Lufthansa and Air France-KLM last week citing improving revenues and robust bookings.
Ryanair has exploited the recession to expand at the expense of higher-cost rivals in Europe, and the group said it was talking to airports across the continent about opening new routes.
"The thing that has impressed most about the continued capacity contraction around Europe is the extent to which the main airports are now talking to us and trying to encourage us to fly to and from [them]," Chief Executive Michael O'Leary told an analyst conference.
Austerity measures
Most of Ryanair's growth comes from the continent and it is reducing capacity in recession-weary Ireland, blaming a tourist tax introduced last year as part of government austerity measures. O'Leary said the only airports he was not talking to about increased capacity were in Ireland and the UK's Stansted airport, which he has criticised for having a high cost base.
Britain's Office of Fair Trading launched an investigation into Ryanair's minority stake in rival Aer Lingus last week and the outspoken O'Leary, in typically brash fashion, dismissed the probe as "a wild goose chase".
