The weak pound has forced Ryanair to slash its profit forecasts
The budget airline makes about one-quarter of its revenue from the British market.
NO-FRILLS AIRLINE RYANAIR has cut its full-year profit forecast by 5% because of the pound’s slump since Britain voted to leave the EU.
“The primary cause of this slightly lower growth in full year profitability is the 18% fall of sterling post Brexit which will reduce second half average fares,” the Dublin-based airline said in a statement.
The pound’s tumble is reducing the amount Ryanair earns from its key British market once the currency is converted into euro, which the Irish-domiciled airline uses to price its earnings.
Ryanair said it was cutting its 2016/17 net profit forecast 5% to between €1.3 billion and €1.35 billion – an increase of 7% on last year’s figure. It had been expecting a 12% increase on the 2015/16 financial year.
Ryanair chief executive Michael O’Leary added in the statement that “stronger traffic growth and better cost control” would contribute to offsetting the hit in revenues, adding that the British market represents about one-quarter of the group’s total income.
Plunging pound
The pound has tumbled to seven-and-a-half-year lows against the euro and 31-year troughs versus the dollar since Britain’s June vote in favour of leaving the European Union as markets price in future economic uncertainty.
“Ryanair’s problem is a microcosm of Ireland’s post-Brexit conundrum – huge exposure to the UK market and sterling, but earnings booked in euros,” said Neil Wilson, market analyst at ETX Capital.
“The airline derives 26% of its earnings in pounds, while around a third of Irish exports head to the UK.”
The office of British prime minister Theresa May yesterday sought to downplay cabinet tensions over Brexit after reports her finance minister is antagonising colleagues with his warnings about the economic dangers.
Chancellor of the exchequer Philip Hammond has reportedly been pushing to delay measures designed to control immigration, which would likely be viewed by EU leaders as incompatible with continued membership of the single market.
O’Leary has meanwhile previously said that Brexit uncertainty would more than halve Ryanair’s UK growth.
