4th Feb 2019 09:15
LONDON (Alliance News) - Ryanair Holdings PLC on Monday said it will make changes to its corporate structure after swinging to a third-quarter loss and warning of lower annual profit.
The stock was down 4.5% early Monday at EUR10.925. Ryanair shares have lost 32% of their value over the past 12 months.
The Irish budget airline said that over the next 12 months it will move to a group structure not dissimilar to that of rival International Consolidated Airlines Group PLC, owner of British Airways and Spain's Iberia.
Under the proposed changes, a small senior management team will oversee the development of four airline subsidiaries, Ryanair DAC, Laudamotion, Ryanair Sun and Ryanair UK.
The company said it believes the changes to its structure to be necessary to deliver cost and operating efficiencies as well as "enabling the group to look at other small scale merger and acquisition opportunities".
Chief Executive Officer Michael O'Leary will become group CEO, leading all the units, the airline said. O'Leary committed to further five years at the head of the company.
Ryanair will, later this year, appoint a replacement as CEO of Ryanair DAC, it said. DAC stands for designated activity company and is the company's main operating unit.
Chair David Bonderman and Senior Independent Director Kyran McLaughlin have agreed to remain on the company's board until summer 2020. They will leave after that date.
"In order to ensure a smooth succession, Stan McCarthy who joined the board in May 2017, has agreed to take up the position of deputy chair from April 2019, and will transition to chair of the board in summer 2020," Ryanair added.
Meanwhile, the airline said its third-quarter results to the end of 2018 were "disappointing", with the group swinging to a EUR83.6 million pretax loss from a EUR112.9 million profit in the comparative period a year ago.
The results included a EUR61.5 million loss resulting mostly from the acquisition of Austrian airline Lauda. Excluding Lauda losses, Ryanair still reported a EUR6.5 million operating loss versus a EUR126.0 million profit a year before.
Ryanair bought a 75% stake in the Austrian carrier, founded by former Formula One racer Niki Lauda, in July after the takeover was cleared by EU competition authorities. In December, Ryanair upped its interest in Lauda to 100%.
The company now expects Lauda to record EUR140 million of exceptional year-one start-up loss due to the "very late" release of schedules, low promotional fares, expensive aircraft leases and unhedged fuel.
For its second year, Ryanair is guiding for a loss from Lauda of between EUR50 million and breakeven, depending on peak season yields.
Meanwhile, Ryanair as a whole reported a 9% increase in revenue in the third quarter to EUR1.53 billion from EUR1.41 billion on the back of higher customer numbers, up to 32.7 million from 30.4 million a year ago.
O'Leary said: "While a EUR20 million loss in the third was disappointing, we take comfort that this was entirely due to weaker than expected air fares so our customers are enjoying record low prices, which is good for current and future traffic growth."
Ryanair load factor, in the third quarter, was unchanged compared to the prior year at 96%.
Looking ahead, Ryanair said that, excluding the expected "heavy" loss from Lauda in its first year of operations, its annual profit will come in between EUR1.0 billion and EUR1.1 billion due to lower winter fares but better-than-expected cost performance in the second half.
A year ago, Ryanair profit was EUR1.45 billion, so the decline will be as much as 31%.
"While we have reasonable visibility of our fourth quarter bookings, we cannot rule out further cuts to air fares and/or slightly lower full year guidance especially if there are unexpected Brexit and/or security developments which adversely impact fares for close-in bookings between now and the end of March," Ryanair said in its statement Monday.
"We do not share the recent optimistic outlook of some competitors that Summer 2019 airfares will rise. In the absence of further EU airline failures, and because of the recent fall in oil prices we expect excess short haul capacity to continue through 2019, which will we believe lead to a weaker – not stronger – fare environment," it continued.
For January, the airline reported Monday that passenger numbers rose 11% to 10.3 million from 9.3 million a year prior, with Laudamotion contributing 300,000 new customers.
On a rolling annual basis, Ryanair passengers in January were up 8% to 140.2 million from 129.4 million.
During the first month of its fourth quarter, the company operated over 58,000 flights, with more than 90% arriving on time, excluding the delays due to air traffic control strikes, it said.
In the past year, Ryanair suffered from prolonged strike action from both air traffic control workers and its own pilots and cabin crew members.
Following the summer of strikes, Ryanair was able to sign deals with several unions across its international operations putting an end to the disruptions.
With regards to Brexit, Ryanair which had previously warned on the "underestimated" risk of a no-deal, said it has taken all the "necessary steps" to protect the company in that event.
"We have now obtained a UK AOC to protect our 3 domestic UK routes, and we will place restrictions on the voting rights and share sales of non-EU shareholders for a period of time, in the event of a hard Brexit, to ensure that Ryanair remains at all times an EU owned and EU controlled airline, even if the UK exits the EU without a deal," the company explained.
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