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Ryanair blames overcapacity for profit warning

The problems affecting Ryanair are indicative of the dangers facing all airlines in Europe – particularly low-cost carriers.

Ryanair is blaming lower-than-expected winter fares due to short-haul overcapacity in Europe for its latest revision to its forecast for full-year profit.

This is the second time in three months that Ryanair has issued a profit warning – and it says a further downgrade is possible if Brexit causes disruption, the news agency Reuters reports.

The low-cost carrier adjusted its full-year profit guidance down from between €1.1 billion and €1.2 billion to between €1 billion and €1.1 billion.

These figures exclude exceptional start-up losses related to its acquisition of LaudaMotion, completed last August. These losses, Ryanair says, have been cut from €150 million to €140 million because of a better-than-expected performance of the Austrian carrier over the winter.

The profit warning comes despite 9% traffic growth to 142 million passengers, stronger ancillary sales and a buoyant cost performance for the second half of the year.

Before the first profit warning in October – when a series of strikes hit the airline – Ryanair had originally forecast profits of between €1.25 billion and €1.35 billion.

Danger for airlines
The problems affecting Ryanair are indicative of the dangers facing all airlines in Europe – particularly low-cost carriers.

Pressure on LCCs is likely to reshape the industry, chief executive Michael O’Leary believes, although Ryanair’s growing passenger numbers bode well for the medium term.

“We believe this lower-fare environment will continue to shake out more loss-making competitors,” O’Leary said, pointing to the problems facing Norwegian.

“Lower air fares is the fault of the industry being too aggressive with expansion plans, as there is now overcapacity in the short-haul market,” the investment group AJ Bell says in a new commentary. “This situation could get even worse unless more airlines go bust.”

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