Europe’s leading low cost airline slashed its profit forecast for the current fiscal year to between €1.1 billion ($1.27 billion) and €1.2 billion ($1.39 billion). That’s about €150 million ($174 million) less than the company had expected.
Shares in Ryanair dropped over 10% in London, leaving the stock down more than 22% so far this year. The company said it could slash its profit guidance further if the strikes continue.
Ryanair first recognized unions in December 2017 and has since struck labor agreements with pilots in Ireland and Italy. It has yet to reach agreements with union officials in countries such as Spain, Portugal, Germany and Belgium.
A turning point for low-cost airlines?
Over the long run, labor disputes, shrinking profit margins and rising customer dissatisfaction could undermine the business model that made Ryanair the largest airline in Europe, with 13,000 employees and a fleet of 430 aircraft.
Analysts at Bernstein said Ryanair’s profit warning is “the latest indication that the ‘low cost wins, legacy loses’ story may be coming to an end.”
The tougher climate is now forcing Ryanair to scale back.
The company said Monday that it would close bases at Eindhoven in the Netherlands, and Bremen and Niederrhein in Germany on November 5. It said that affected pilots would likely be offered other positions and it would seek to minimize job losses among cabin crew.
