Ryanair today issued a profit warning, saying it was reducing its full-year profit guidance by €100m (£88m) due to a drop in revenue from winter fares.
The budget airline said it expects profit after tax of between €1bn and €1.1bn, down from a range of €1.1bn to €1.2bn.
The warning comes as winter fares are expected to fall seven per cent, larger than the two per cent drop initially forecast.
The Dublin-based company said the reduced guidance was offset by better-than-expected traffic, which grew nine per cent to €142m, while the firm pulled it higher sales of extras such as baggage fees and food.
Chief executive Michael O’Leary said: “While we are disappointed at this slightly lower full year guidance, the fact that it is the direct result of lower than expected second half air fares, offset by stronger than expected traffic growth, a better than expected performance on unit cost and ancillary sales is positive for the medium term.”
O’Leary warned the airline cannot rule out further cuts to air fares or a further reduction in its full-year guidance in the case of “unexpected Brexit or security developments”.
Shares in Ryanair slipped more than one per cent following the profit warning, while rivals Easyjet and Wizzair also saw a marginal drop in shares.
Ryanair said the guidance excludes exceptional start-up losses in Laudamotion, the Austrian low-cost airline founded by former Formula 1 driver Niki Lauda.
But Ryanair, which owns a majority stake in Laudamotion, said the losses had been cut from €150m to €140m due to better-than-expected unit cost performance.
The update comes amid a tough period for budget airlines, which have seen a squeeze on profits from falling ticket prices and rising fuel costs.
Ryanair has also seen its profits hit by a series of strikes, which led to hundreds of flights cancellations over the summer.
Naeem Aslam, chief market analyst at Think Markets, said: “If you want to keep your investors happy, you need to make sure that you are running your affairs correctly.
“You cannot just afford battles with unions, or strikes as both of these affect company’s growth number and most importantly you want to show that your customer service policies and the image is friendly and Ryanair really needs to get a good grip on this.”
Rival airline Flybe saw its shares tumble earlier this week as shareholders reacted to takeover discussions for the struggling Exeter-based firm.
Richard Branson’s Virgin Atlantic is leading a consortium of buyers that has tabled a £2.8m bid for the company.
O'Leary today said he expects the lower fare environment to “shake out” loss-making competitors such as Flybe. But shares in Flybe jumped more than 10 per cent to 240p in early trading.