DUBLIN (Reuters) - Ryanair (RYA.I), Europe’s biggest budget airline, undershot analyst forecasts with a profit slide of 29 percent in the three months to June as it grappled with a toxic mix of austerity, recession and stubbornly high fuel prices.
The Dublin-based airline, which is waiting to hear whether EU regulators will approve its takeover of Aer Lingus AER.I, said the weak economic outlook for Europe would continue to restrain fare growth for the rest of the year.
“There is no sign of a European-wide economic recovery. There doesn’t seem to be any light at the end of the tunnel,” Chief Financial Officer Howard Millar told Reuters Insider TV.
The airline maintained its forecast of a profit of between 400 million euros (312.7 million pounds) and 440 million for the year to March.
Net profit for three months to June was 99 million euros, compared with a forecast of 123 million by four analysts polled by Thomson Reuters. Earnings per share were 6.9 euro cent in the quarter, compared with an average analyst forecast of 9 cents.
“The bottom line is that recession and austerity are having bigger impacts than the market had expected,” said Merrion Capital analyst Gerard Moore.
The airline, which has a lower cost base than many of its competitors, said it had hedged 90 percent of its fuel needs for the year to March at approximately $1,000 per tonne. That is up 21 percent on last year, but lower than current market prices.
The cost of the remaining 10 percent will be lower than expected at the start of the year, but this saving will be more than offset by a worse euro to dollar exchange rate, the company said in a statement.
Average fares were up 4 percent, in line with mid-single digit growth forecast by the airline in May, and were on track for average growth of around 3 percent in the year to March, Millar said.
The airline will go ahead with already announced plans to ground 80 of its 270 planes over the winter due to high fuel costs, Millar said.
“With oil prices at $100 per barrel it really doesn’t make sense to fly these aircraft,” Millar said. “The more you fly, the more you lose.”
However, it sees potential for further increases in capacity in the key summer season. Its offer for rival Aer Lingus aims to take advantage of its premium network of airports in Europe which complements its own lower-cost regional network.
Last week, the European Commission, which acts as EU competition watchdog, said it would decide by August 29 whether to clear Ryanair’s $841 million bid for Aer Lingus.
Ryanair said it would not comment further.
Poor weather in the United Kingdom boosted sales at budget rival easyJet Plc EZJ.J in the three months through June, pushing revenues up by 10.5 percent. Ryanair, has roughly half as much exposure to the United Kingdom.
Most European carriers continue to struggle with high fuel costs, weak consumer confidence and the euro zone crisis.
Reporting by Conor Humphries; Editing by Mike Nesbit