Ryanair spooks investors with profit warning

By Padraic Halpin and John Bowker

DUBLIN/LONDON (Reuters) - Budget airline Ryanair trimmed its full-year profit forecast on Monday as it was forced to cut fares to fill aircraft, sending its shares down 12 percent and hitting the broader airlines sector.

Ryanair, famed for its fixation on cutting costs, squeezes its customers by charging stiff penalties for excess baggage, booking fees on certain credit cards and has even considered a "fat tax" on heavier passengers and coin-operated toilets

Investors shrugged off the Irish carrier's better-than- expected first-quarter profit, which was largely boosted by lower fuel costs, and focussed instead on its warning that full-year net profit would come in towards the bottom of a 200 million to 300 million euro range due to falling yields.

Yields are a keenly watched measure in the airline industry as they show the average revenue gained per mile per passenger.

"There are no signs of recovery in any country across Europe. We think things are getting worse. There are no signs of green shoots so a tough winter for everyone," Chief Financial Officer Howard Miller told a news conference.

The profit warning hit share prices across the airline sector, and shares in Ryanair -- Europe's biggest low-cost airline, which started out with a 15-seater plane in 1985 -- were down 9.1 percent to 3.06 euros by 1302 GMT (2:02 p.m. British time).

Shares in Lufthansa were down 0.9 percent, while fellow 'Big Three' carriers British Airways and Air France-KLM fell 3 and 2 percent respectively.

"The profit warning is not the biggest surprise in the world, but it shows that yields are tougher than expected, and that reads across negatively to pretty much everybody. If you are putting a lot of growth in, yield management has to work pretty hard," said analyst Andrew Fitchie from Collins Stewart.