Abu Dhabi, UAEThursday 19 September 2019

Ryanair forecasts Boeing 737 Max grounding to hit annual profits

Airline has 'utmost confidence' in Boeing and will take delivery of the Max planes this financial year

Ryanair warned a fare war and weakening economies may hold back earnings this year. REUTERS/Ints Kalnins/File Photo
Ryanair warned a fare war and weakening economies may hold back earnings this year. REUTERS/Ints Kalnins/File Photo

Ryanair, Europe’s biggest low-cost airline, said the grounding of Boeing 737 Max jets and continued weakness in fares will trim its annual profit for this fiscal year.

The Dublin-based airline forecast a net income of €750 million (Dh3 billion) to €950m for the year to March 2020, depending on whether revenue per passenger rise 2 per cent or 4 per cent, Ryanair said yesterday, in a regulatory filing to the London Stock Exchange, where its shares trade.

Profit for the fiscal year 2019 declined 39 per cent to €885m, and the company said earnings could decline further.

“Our outlook for FY20 remains cautious on pricing,” said Michael O’ Leary, Ryanair’s chief executive. “We are guiding broadly flat group profits.”

Ryanair, which has an order placed for 135 737 Max 200s and the option for 75 more, will take deliveries in October and expects to fly them by November, assuming that the

European Union Aviation Safety Agency clears the plane to return to service before that. Deliveries of the first Max jets were due in April but were deferred after it was grounded globally for being involved in two fatal crashes in Ethiopia and Indonesia within a span of five months.

“We continue to have utmost confidence in these aircraft,” Mr O’Leary said in a boost to the troubled Boeing model.

Ryanair, which operates the older 737 model, expects costs to increase because of the delivery delays.

The new jets would have added 4 per cent more seats, 16 per cent fuel efficiency and delivered “significant” cost savings for the airline in the next five years.

“The delayed deliveries in 2019 means that we will not see any meaningful cost benefit until FY21,” the company said.

The grounding has forced Ryanair to cut around a million seats this year but it still expects passenger traffic to grow 8 per cent in fiscal 2020 to 153 million, up from 139 million in 2019.

The airline plans to hold discussions with Boeing about “modest compensation”, Neil Sorohan, Ryanair’s chief financial officer, told Reuters.

Shares in the budget airline fell 3 per cent per cent on the LSE yesterday after its profit forecast for the year to March 2020 fell short of analyst estimates.

Ryanair joined the ranks of other European airlines bracing for a tough year as overcapacity, weaker economies and higher oil prices squeeze profit margins.

Updated: May 20, 2019 07:19 PM