Ryanair shares have sold-off severely this morning after the airline confirmed that profit would be 12% below the previous forecast. The group now expects full-year profit to be between €1.1 billion and €1.2 billion, and the previous guidance was between €1.25 billion and €1.35 billion.
Ryanair (LON:RYA) cited higher costs regarding fuel and flight compensation regulations for the profit downgrade. The group had a series of strikes as employees demanded better pay and conditions. This had a negative impact on the company, as prospective customers were put off from booking with the airline due to flight cancelation risk, and the firm cut prices to entice customers and overshadow the negative publicity caused by the strikes.
In August 2017 the airline’s share price hit an all-time high as the company made a concerted effort to improve customer service prior to that, and it clearly paid off. After years and years of poor relations with its customers, the company finally cracked the code and started treating clients fairly and it proved to be a winner all round.
This time last year the pilot roster fiasco prompted mass cancellation of flights, and left customers disgruntled. Since then, poor relations with staff have also brought about mass flight cancellations. Clients like cheap airfares, but they value flight certainty more, and the company is running the risk of doing long-term damage to the brand. The airline is still aiming to make over €1 billion profit, so it’s not like they can’t afford to pay their staff well.
The share price has fallen 38% since its all-time high over 13 months ago, and if Michael O’ Leary wants to pull the stock out of this tailspin, he needs to treat his staff and customers better.
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