Around €1.3 billion was wiped off the value of Ryanair yesterday, following a profits warning by Europe's biggest low-fare airline.
Ryanair shares tumbled by 28 per cent, falling from €6.75 to €4.86 in Dublin yesterday, which left them hovering at lows last seen immediately after the September 11th, 2001 terrorist attacks on New York and Washington.
By close of business, Ryanair's stock market value had shrunk from €5 billion to €3.7 billion with chief executive Mr Michael O'Leary admitting that the meltdown may continue for some days and weeks yet. Market sources also reported some resentment among investors who were annoyed that members of the Ryan family had recently sold 6.4 million shares at a price of €6.90.
The airline stunned the market by declaring that its profits for the 12 months to the end of March next would be 10 per cent below expectations at €215 million because it had been forced to cut its fares more aggressively in response to increased competition. It said the euro's strength was also affecting its business.
In the three months to the end of December 2003, the airline reported a 10 per cent rise in after-tax profits when adjusted for exceptional costs, which was below market forecasts.
More worryingly though, it said that bookings in 2004 had declined and that the yield per passenger would fall by between 25 and 30 per cent as it slashed prices to stimulate demand. It cautioned that this trend would continue this year.
Announcing the figures yesterday, Mr O'Leary tried to soothe investor nerves by saying the airline was still generating world-leading profit margins through aggressive cost management and its low-cost base.
Sentiment towards Ryanair had disimproved in recent days, particularly as an investigation into illegal subsidies it received at Charleroi airport in Belgium seemed likely to demand the repayment of these monies. Ryanair estimated that at worst it could have to repay €5 million to the Walloon regional government which owned the airport. Other analysts have put the figure as high as €13 million.
Mr O'Leary said the "rumblings" from Brussels indicated that the ruling, expected next week, would be the most negative decision possible for European low-fare airlines.
The Commission has also signalled that it would bar discounts on landing and ground handling being offered at state-owned airports and would restrict marketing incentive arrangements to three years.
Mr O'Leary said that the most worrying aspect of the ruling was that the Commission seemed to be trying to impose these rules on privately owned airports across Europe which had received state aid. "It is difficult to see how the Commission could draft such a backward judgment. It will set back European air travel by 5,000 years. They are taking us back to Stalinist Russia," he said yesterday.
The airline's deputy chief executive, Mr Howard Millar, said the ruling could affect Ryanair's arrangements at airports in Ireland, France and Spain in particular. He estimated that Ryanair could have to repay "several million euro" to Aer Rianta alone.
One analyst asked Mr O'Leary if he should resign, suggesting that his snide remarks about Commission officials may have contributed to the scale of Ryanair's likely defeat.
"Some people will believe that my handling of the case has caused this and I would find it hard to disagree with elements. If that is the case, then the ultimate responsibility rests with me and that is a matter for the board and our shareholders," he replied.
