This article is more than 1 year old

This article is more than 1 year old

Ryanair has issued its second profit warning in four months, blaming intense competition over the winter that prompted the Irish budget airline to cut fares.

Profits for the year ending 31 March will be €100m (£88m) lower than previous expectations, at between €1bn to €1.1bn, the company said in a statement to the stock market. That was down from the €1.1bn to €1.2bn range previously expected.

Ryanair’s chief executive, Michael O’Leary, said he was disappointed to cut the company’s profit guidance and said the airline could be forced to further reduce fares and guidance.

“We cannot rule out further cuts to air fares and/or slightly lower full-year guidance if there are unexpected Brexit or security developments which adversely impact yields between now and the end of March.”

Ryanair shares fell 5% after the profit warning, which was the result of lower than expected air fares in the second half of the company’s financial year, which includes the Christmas holiday period.

Average fares from November onwards fell by 7%, considerably lower than the 2% fall the company had expected.

Ryanair previously issued a warning over profits in October after it suffered a summer of disruption and flight cancellations as cabin crew based in Spain, Belgium, the Netherlands, Portugal, Italy and Germany went on strike. It was forced to cut hundreds of flights in August and September.

O’Leary is betting that Ryanair can benefit in the medium term from a larger share of the market as other budget competitors struggle. The outspoken chief executive has previously said he expects more airlines to go bust.

In the update on Friday, he said: “There is short-haul overcapacity in Europe this winter but Ryanair continues to pursue our price passive/load factor active strategy to the benefit of our customers who are enjoying record lower air fares. We believe this lower-fare environment will continue to shake out more loss-making competitors, with Wow, Flybe and reportedly Germania, for example, all currently for sale.”

The airline industry has endured a difficult few months, with the closure of multiple smaller carriers in 2018, amid rising fuel costs and industrial action. Flybe, one of Ryanair’s main rivals on British regional routes, was forced this month to accept a cut-price £2.2m rescue bid from a consortium led by Virgin Atlantic as it tries to fend off insolvency.

However, Gerald Khoo, an analyst at the broker Liberum, said Ryanair was better positioned than some of its rivals to ride through industry turbulence because of its large route network and relative financial strength.

He said: “We see tougher market conditions in the short term as positive for the stronger airlines in the long term, since this clears out weaker competitors and aids consolidation in the market.”

Ryanair has aggressively targeted market share. On Friday the airline said traffic growth was stronger than previous forecasts. Passengers are now expected to take 142m flights over the full year, which would represent a 9% increase on the year before.

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The airline also said it performed better than expected on keeping the cost per passenger down.

John Strickland, the director of airline specialist JLS Consulting, said he expected “more bumpiness along the road this year” in Ryanair’s negotiations with unions, which can add to wage costs, but believes a successful conclusion will be achieved. Ryanair recognised multiple unions in the UK and EU for the first timelast year .

However, Strickland said Ryanair had a strong record of cost control, such as for aircraft and fees to airports, while pressure on fuel costs – one of the main causes of its October profit warning – had eased recently.