Ryanair shares plunge after warning over profits

Ryanair shares have slumped 13% after the company warned that profits are likely to fall this year.

It now expects to make a profit of between 500m euros (£423m; $674m) and 520m euros for the financial year ending in March, down from its previous projection of 570m euros.

The airline said it expected fares to fall 10% over the winter months and was grounding aircraft as a result.

Ryanair will also introduce allocated seating from February next year.

Monday's profit warning means that Ryanair will report its first fall in annual profits in five years.

It also comes just two months after the company made its first profit warning in a decade.

Softer conditions

Europe's biggest discount airline said that fares had been falling because of "increased price competition, softer economic conditions in Europe and the weaker euro-sterling exchange rate".

"The continuing fare and yield softness means that full-year profits will be lower than previously guided," Michael O'Leary, chief executive of Ryanair, said in a statement.

The warning came as the airline reported a net profit of 602m euros for the six months to the end of September, a rise of just 1% from a year earlier.

It said it carried 49 million passengers during the period and generated a revenue of 3.26bn euros, up 5% from the same period last year.

'Listen to customers'

Ryanair has enjoyed robust growth over the past few years as a global economic downturn saw many consumers turn to more affordable travel options.

However, the company said that "the next 12 months will see a brief pause in traffic growth".

Given the weak conditions in key markets and increased competition, the airline is looking to focus on improving its service in an attempt to retain customers and attract new ones.

It has announced a plan to introduce allocated seating from 1 February next year which will allow passengers to select seats on aircraft, as long as they check in more than 24 hours before departure.

The airline said the move will make "the boarding process smoother" and enable "families or other groups to ensure that they sit together".

It added that the return to allocated seating was in response to enormous demand and was "part of the airline's commitment to listen to its customers".

In recent weeks, the carrier has also introduced measures such as allowing a small second carry-on bag and a 24 hour "grace period" to allow passengers to correct minor booking errors.