Low coast airline ryanair has warned that its profits could be halved this year as fuel costs rise and as the UK pound weakens.
The warning came as the budget airline reported that net profit dropped 27% to 35m euros ($52m; ?26m) during the October to December quarter.
The drop was its first quarterly decline in a more than a year.
Chief executive Michael O’Leary said that the weakening profits were part of a cyclical downturn in the industry and a “perfect storm” may be lying ahead.
The company’s shares tumbled 13% to 3.14 euros in early trading on Monday.
There is no visibility, it’s just guesswork what they are doing at this stage
Bloxham analyst Ross McEvoy
See ryanair’s share price 3.15 10.55am Mon 4 feb hight of 2008 3.62
“The European airline sector is presently facing one of these cyclical downturns, with the possibility of a ‘perfect storm’ of higher oil prices, poor consumer demand, weaker sterling and higher costs,” said Mr O’ Leary.
Gloomy outlook
Mr O’Leary said it was too early to make an accurate assessment of earnings for the firm’s financial year beginning 1 April.
But he warned that if oil prices remained above $85 a barrel, and if consumer sentiment and the UK pound stayed weak, then the airline’s earnings for 2008 could fall by up to 50% to 235m euros.
He said that the company had not taken out protection, known as hedging, against the oil price or weak pound.
“We remain essentially unhedged for next year,” the budget airline said.
Not being hedged essentially means the airline has not used financial instruments to insure itself against rising fuel costs or adverse exchange rate moves.
The gloomy outlook is likely to weigh on ryanair’s share price, which has already slipped 18% this year, predicted Bloxham analyst Ross McEvoy.
“There is no visibility, it’s just guesswork what they are doing at this stage,” he said. tighten you bealt” .
price could go up for us travels as 20.00 euros per leg off flights
link to the show is http://news.bbc.co.uk/2/hi/business/7225681.stm
