Ryanair shares tumble after warning fares will fall in 2017

Bloomberg

Ryanair Holdings Plc predicted that ticket prices will decline through the rest of the year as Europe’s biggest discount carrier competes to lure more customers amid excess capacity. The shares fell the most in four months.
The Dublin-based airline said fares will slide 8 percent in the six months through March, accelerating from a 5 percent drop in the fiscal first half. Amid the competitive pressure, Ryanair reaffirmed its threat to shift planes out of the UK because of Brexit, saying it needs clarity by next year.
Europe’s carriers are coming under pressure, as the low oil prices encourage airlines to add routes that might otherwise be unprofitable. Ryanair, which has the lowest operating costs in the industry, is adding fuel to the fire by increasing capacity. The company increased its passenger target for the fiscal year through March by 1 million people to
31 million.
“Our bookings are strong but it’s very competitive,” Chief Financial Officer Neil Sorahan said in a phone interview on Monday. “With low fuel, there are guys in the market who possibly shouldn’t be there. There’s been a lot of capacity that’s come into places like Spain and Portugal, the Middle East, Tunisia and Turkey.”
Ryanair shares fell as much as 5.6 percent, the most since March 7, and were trading 2.7 percent lower at 17.55 euros as of 9:43 a.m. in Dublin. The stock has gained 21 percent this year, valuing the
company at 21 billion euros.
Buoyed by Easter shifting to April this year from March in 2016, net income jumped 55 percent in the fiscal first quarter propped up by a 1 percent increase in ticket prices. While Ryanair stuck by its full-year guidance for earnings of 1.4 billion euros to 1.45 billion euros, it cautioned that the remaining nine months will be difficult.

Alitalia Proposal
EasyJet Plc, Europe’s No. 2 discount carrier, fell almost 6 percent after cautioning that fares are set to drop into next year. Ryanair had already warned that low oil prices would continue to support capacity growth and drag down per-seat revenue, saying in May that fares would drop by 5 percent to 7 percent during fiscal 2018.
To explore further expansion opportunities, Ryanair has made an offer for insolvent Alitalia SpA, the highest-profile casualty of Europe’s capacity splurge and fare war, Sorahan told Bloomberg Television. The Irish company has a “genuine interest” in the Italian flag carrier and the survival of its long-haul operations, having offered to provide passengers via a feeder agreement, he said.
There’s a ‘strong likelihood’ that Ryanair will convert 100 options for Boeing Co. 737 Max jets into firm orders, possibly including the larger Max 10 version launched last month, Sorahan said. The carrier ordered 10 additional Max 200s in June, for a total of 110, and has extended leases on 10 older 737-800s.