Ryanair price-cutting hits profit

Ryanair price-cutting hits profit

Shares in low-cost airline Ryanair have fallen by nearly a quarter after the company warned of falling profits.
The carrier said it expected average passenger revenue in the first three months of 2004 to drop by up to 30%.

As a result, full-year profit is forecast to drop by about 10% to 215m euros (£148.4m; $271m).

The announcement comes a day after the airline said it must repay millions of pounds in subsidies after the European Commission found them to be illegal.

Ryanair shares fell 23% to 5.2 euros during early trade.

World leader

Even so, the company remained upbeat about the outlook for its business.

Chief executive Michael O’Leary said that even with the drop in earnings, “Ryanair will continue, by some considerable distance, to be the world’s most profitable airline by margin”.

Ryanair announced a 10% rise in profit to 47.5m euros for the October to December period, with sales climbing 37% to 255m euros.

Passenger numbers surged by 54% during the quarter to a record 6.1 million people.

Competition among low-cost carriers has increased as new companies have started up and the number of routes has increased.

Ryanair said the Commission’s ruling on the subsidies it receives from Charleroi airport in Belgium would mean a ban on future subsidies, and that may threaten many of its routes.

Mr O’Leary says this is the worst possible result, and that he will appeal against the Commission’s formal ruling when it is issued next week.

Still looks quite profitable to me!