Ryanair will have last laugh despite second profit warning in four months
Fares have tumbled as a result of intense competition. While this has hurt Ryanair's bottom line, it has the clout to outlast and outshoot its rivals
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Your support makes all the difference.No one would be judged harshly for feeling a certain schadenfreude at the expense of Ryanair in the wake of the profit warning the low cost carrier put out this morning.
The company, and its loud mouthed CEO Michael O’Leary, have made scant effort to win friends among customers, staff, the media, even investors on occasion.
There’ll probably have been more than a few quiet chuckles at the sight of the company’s second alert in the space of just four months.
The airline said earnings for the year ending March 31 will be €100m (£88m) lower than had been forecast, with the final tally likely to come in at between €1bn and €1.1bn.
A ‘disappointed’ O’Leary warned that there may be further cuts to its guidance on the horizon.
The reason? Rock bottom fares driven by intense competition over the winter that may come down further.
Far from laughing at O’Leary’s expense, customers are probably just laughing. It’s a good time to be flying. It’s just that it may not last.
Finding a cheap flight has rarely been easier because there are are a lot of companies currently chasing customers. That’s what O’Leary was referencing when he spoke of ‘short-haul over capacity in Europe this winter’.
Profit warnings are usually the cue for a sell off, but Ryanair’s shares didn’t fall by anything like as much as its fares. They only lost a couple of per cent.
The reason? O’Leary thinks he’ll emerge as the winner in the medium term and the market thinks he’s right.
In his statement he pointed to the troubles faced by some of his rivals as evidence. Flybe, for example, nearly went under before being its recent proposed rescue by a consortium led by Virgin for a rock bottom price.
Ryanair isn’t making as much as the company or its investors had hoped. But its still making plenty and it has both the resources and the wherewithal to outlast and out punch its rivals when it comes to the current price war. Some of them will not survive the inevitable shake out and that will leave Ryanair in a good position to make back the money it has lost, and more.
If the carrier, and its boss, could just learn to behave a little better towards staff and customers - some of its recent difficulties have been self inflicted - it should be left sitting pretty. So forget any thoughts of schadenfreude. O’Leary’s probably going to have the last laugh.
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