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Ryanair cuts profits forecast in turbulent sector

Tuesday, October 18, 2016 - 01:36

Ryanair says a further drop in the value of sterling has forced it to cut its forecast for full-year profit by 5 percent. As Sonia Legg reports, it's not the only low-cost airline facing uncertain times after decades of rampant growth.

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Low cost airlines were the most vocal anti-Brexit campaigners and now we're seeing why. Ryanair's been forced to cut its forecast for full-year profit by 5 percent. What's more - investors are pleased. (SOUNDBITE) (English) CITY INDEX, RESEARCH DIRECTOR, KATHLEEN BROOKS, SAYING: "Considering how much sterling has fallen and how that really does put pressure on their cost base that isn't bad." In the five months since Britain's Brexit vote - the share value of European airlines has fallen by almost a third. With terrorism fears also deterring travellers, low-cost carriers have been forced to slash fares and cut costs. Europe's number two low-cost carrier easyJet had already cut its profit forecast. (SOUNDBITE) (English) CHIEF ECONOMIST AT WORLD FIRST, JEREMY COOK, SAYING: "Any low cost carriers working out of the UK, you only have to turn up at a UK airport and look at a bureau de change and see that you are getting less than a pound for every euro that you exchange. And that you are very much spending a lot of money if you are only taking a one hour flight over to Spain." Capacity in Europe is expected to keep growing by five or six percent a year, way faster than economic growth. That's why the sector is still attractive. Holiday airline Monarch was last week kept alive by a bailout from investors. And Lufthansa agreed to lease 40 planes from loss-making Air Berlin, to keep them in the market. Air France-KLM and Lufthansa are also investing again in their low-cost arms - despite previous failed attempts. Ryanair - Europe's largest low-cost carrier - is clearly doing better than most. Its shares have only lost 14 percent since the Brexit vote. It's now planning to cut winter fares by up to 15 percent in an attempt to keep profits up by attracting more customers.

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Ryanair cuts profits forecast in turbulent sector

Tuesday, October 18, 2016 - 01:36